Have sterling exchange rates bottomed out for now?

Pound to Dollar Rate Supported by UK GDP Data

The expectations for sterling remain rather unsettled but it does appear that now much of the bad news is priced into current exchange rates. Expectations for the UK economy to have a tough year and for there to be increased anxiety surrounding the UK’s relationship with the European Union will do little to boost confidence in the pound. The uncertainty of the EU Referendum is likely to linger until we have some news on just what ‘concessions’ exactly the Prime Minister has negotiated. In my opinion it seems highly unlikely David Cameron will achieve some of the important terms he seeks as they conflict directly with the core principals of the European Union. One example is Immigration. The UK is seeking tougher new rules on who is allowed into the country and the terms of stay including the duration until they can claim benefits. I think that in the coming weeks once news breaks that the UK is unlikely to have negotiated its position to a more ‘favourable’ EU, the pound will slip further as the bare faced reality of a UK exit from the European Union becomes a real possibility.

to understand where we are going it is useful to look back and one of the main reasons sterling has been so strong in the last year is the prospect of the UK raising their interest rate. Such uncertainty over the EU question leaves any potential interest rate hike much further away in the future and investors are seeking much safer predictable shores such as the US and Euro. Sterling has now fallen to multi year lows against the Euro and Dollar. In my research for this blog and my work generally I have found the Bank of England data team most useful and having contacted some of the team there personally have found them very helpful too. If you have any questions over the latest trends on sterling exchange rates please contact me on [email protected] and hopefully I can help you make sense of the latest trends!

The rest of the week is not holding too much fruit for those still hopeful of improvements to sell the pound. Tomorrow we have UK Unemployment data and Thursday the latest European Central Bank meeting. These releases could provide some brief respite for your transfer or present a final consolidation of the recent trends. On balance it does appear that the pound will suffer further in the future. Please contact me Jonathan on [email protected] to learn more.