Sterling wobbled against the USD and Aussie Dollar today partly down to weak US retail sales, but also due to speculation around what the Bank of England will say in their latest Quarterly Inflation Report tomorrow. Combined with the UK unemployment statistics also released tomorrow morning, it will give a very good insight into how the UK economy is growing, and when the Bank of England may consider raising interest rates. The UK has published some increasingly good figures over the last few months, helping the pound gain in value, but the main issue for the pound is at what point will the BofE feel that the data is good enough that they can afford to hike rates without fear of hurting the recovery.
Should tomorrow show growth forecasts going up, then we could see sterling pick up a touch more, although I think they will be at pains to stress the recovery is a slow process and markets shouldn’t expect a sudden surge. However a weak showing could result in some of the recent optimism subsiding and see sterling slump back. In my view I would expect the unemployment figures to come down fractionally, and the Bank of England to make a cautiously optimistic improvement to UK targets, so anyone selling foreign currency may want to cash in on sterling soon.
The pound is doing particularly well against the Euro because of upcoming inflation data for the EU. Most European data of late has been disappointing to say the least, and there is a growing consensus (backed up by Mario Draghi’s own comments) that if inflation on the continent remains low, the ECB will have to intervene to avoid the risk of deflation. Whatever measures they take will likely damage the value of the Euro, and with the next EU inflation figures published on Thursday, the single currency has been coming under fire in advance of this. Euro buyers may want to be ready to pounce soon as we could see a surge up, although some of this may well have been priced in to current euro exchange rates in preparation. Strong inflation figures, whilst unlikely, could see the Euro rebound so Euro sellers may get a temporary reprieve but I fell it is only a matter of time before the Euro slide continues.
If you need to exchange currency to buy a property overseas, or transfer money to cover foreign currency invoices, then feel free to email me Colm at firstname.lastname@example.org and I would be happy to demonstrate what cost savings you can make.