The Pound vs the Euro and the Pound vs the US Dollar fell towards the end of this week after worse than expected economic data published on Thursday.
UK inflation was forecast to rise to 2.8% with average earnings at just 2% which effectively means for the average UK consumer the cost of living has gone up whilst take home pay is less.
Typically if inflation rises this is seen as a good thing for the currency, however, owing to the predicted rise Bank of England governor Mark Carney has cut the UK’s growth forecast from 2% to 1.9%.
Part of the problem for UK inflation has been caused by the Brexit vote which has seen GBPUSD exchange rates fall by as much as 20% since last June and as we import so much here in the UK this has caused a price increase and therefore increased inflation for the British economy.
Whilst we are seeing a slowdown in terms of recent economic data here in the UK it seems as though the Eurozone is performing relatively well.
On Friday German economic growth went up to 0.6% from 0.4% in the first quarter of 2017 from the final quarter last year. As the Eurozone’s largest economy this has helped to strengthen the Euro and although GBPEUR exchange rates were headed towards 1.20 earlier in the week the trend has now bucked with rates falling back into the 1.17 level.
Although we have had a poor end to the week for Sterling exchange rates against all major currencies the focus will likely return back to what is happening politically in the UK.
With the Tories dominating the local elections it looks clear that Theresa May will win next month and another term for the Tories could provide investors with stability and this could help the Pound during the next few weeks.
Having worked in the foreign exchange markets since 2003 I have seen the impact of a number of different elections as well as referendums so if you would like further information or a free quote when buying or selling currency then contact me directly and I look forward to hearing from you.
Tom Holian [email protected]