This week has been the best week of the year so far for Sterling exchange rates, seeing a lift for the Pound against all major currencies and setting some new longer term highs against a few along the way.
There are a number of reasons for this, almost daily we have had good news either for the U.K economy or the U.K politically and this has been as follows;
We heard news that the EU and U.K may have agreed a transition period for Brexit, any positive Brexit news seems to give the Pound a boost, which is not a huge surprise considering how much it dropped following the referendum vote initially. So far it does seem that progress is being made and the economy has not dipped as much as many had anticipated which is good news for the U.K and the Pound.
Tuesday bought inflation data which showed a slight drop off in core inflation figures, and this had been a concern for the Bank of England as inflation not only was well above their 2% target but also well above average earnings figures. When inflation is much higher than average earnings figures this can lead to economic problems as the general consumer’s wages are not rising as quickly as the cost of goods and services, therefore people have less money in their pockets.
Unemployment levels for the U.K had shown an improvement to have come down to 4.3% which is good for the U.K and most notably average earnings (as mentioned above) had risen closer to inflation. This gave Sterling a further boost as not only does this open the door for the Bank of England to raise interest rates in their next meeting in May but it is great for the economy in general too.
The Bank of England voted 7-2 in favour of keeping interest rates on hold, Sterling witnessed an instant boost from this news as last time around the MPC members voted 9-0 in favour of no rate changes.
The boost didn’t last for long however and Sterling dropped back off over the following few hours.
We may hear from the EU summit at any point tomorrow, positive news will push on Sterling further, but for those looking to carry out a currency exchange in the coming days, weeks or months ahead may need to be wary of any bad Brexit news coming out of the summit.
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