Why is the Pound down against most other major currencies, and will this downtrend continue? (Joseph Wright)

Pound to Dollar Rate Slides to 1.38

In the current market conditions we’re seeing Sterling decline at almost a daily basis, and although the drops haven’t been particularly steep they’re adding up with the central level for cable (GBP/USD) now below 1.30, and GBP/EUR now trading very much within the lower end of it’s current trading channel of 1.16 – 1.20, a trading channel I’ve written about before on this website.

There were the obvious major downward spikes in the immediate aftermath of the ‘Brexit’ vote, immediately making the purchase of all major currencies more expensive for Sterling sellers, but this latest downtrend seems to have been triggered by the Bank of England’s (BoE) most recent decisions to cut Interest Rates in the UK down to 0.25% (the first cut since 2009), and to ramp up the level of Quantitative Easing to levels much higher than expected in order to subdue the negative effects of the Brexit on the UK’s economy.

Those hoping for Sterling strength in the short to medium term may find themselves disappointed as the BoE’s Quantitative Easing program of buying substantial amounts of Gilts (government backed bonds) has been in the headlines this week after running into trouble for the first time since QE programs begun back in 2009. The BoE had struggled to purchase the entire amount of £1.17bn as not enough sellers were willing to offload their gilts, and this caused additional Sterling weakness.

The BoE will be giving a speech at 9am this morning regarding this hiccup, and I think that should this issue arise again we could see further Sterling weakness.

I’m also expecting currency markets to react quickly to UK based economic data that’s released out of the UK in it’s post-brexit environment. I think that Sterling sellers should keep an eye on these figures as they could be the catalyst for further Sterling weakness, and anyone hoping to remove the risk of further Sterling falls may wish to consider making their conversion sooner as opposed to later in case this materialises.

If you wish to discuss your upcoming currency transaction involving the Pound, it’s worth your time getting in contact with me on the form below or on [email protected] directly in order to ensure you make a well informed decision on when to make that particular transfer, as well as benefiting from highly competitive exchange rates from one of the UK’s leading foreign currency brokerages. Just provide me with a basic outline of your currency requirement and I will be back in touch with you as soon as possible. You can also call in and ask reception for Joe on 01494 787 478.

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