The pound suffered a poor performance following the Bank of England interest rate decision yesterday but has made a very small recovery since. Sterling exchange rates fell across the board yesterday on the back of the slightly more dovish commentary coming from the central bank. Although interest rates were held at 0.5% as widely expected the pound fell on the back of what was cited as an uncertain path with Brexit as well as the reduction in growth forecasts for 2018 which have been revised down from 1.8% to 1.4%. Clients looking to move out of sterling and buy Euros may wish to consider securing sooner rather than later should the pound fall lower.
The split on the Monetary Policy Committee was 7-2 with both Michael Saunders and Ian McCafferty both voting for a hike. The beast from the Est is taking most of the brunt for the poor GDP data but there are some concerns that the British economy is facing other headwinds, namely Brexit.
Next week’s UK average earnings data for March will be released which will be closely monitored by the Bank of England. Any pick up here will be seen as welcome news by Governor Mark Carney and could help to see the pound rally although the bank has been waiting for a very long time for this to happen.
Brexit and the issue of the customs union on whether Britain should or not be part of will continue to be extremely topical in these coming weeks. This key element is likely to be a major drive for the price of the pound as there are many outcomes in the political arena which could even end up with a general election. Any leaked reports or political rhetoric over the weekend could help to shape the future direction of the pound and in my view that direction should centre on how close those ties will be between Britain and the EU.
Clients looking to sell Australian dollars for pounds saw a sharp movement higher for the Aussie yesterday creating a good opportunity for AUD GBP. The pound fell against all of the major currencies but the drop against the Australian dollar was particularly large. For this particular pair clients should pay close attention to events in the Middle East after US President Donald Trump pulled out of the Iran nuclear deal which is seeing market reactions globally. The Aussie which is perceived as a riskier currency can struggle in time of geopolitical uncertainty.
For more information on the pound and to discuss your own requirement with a view to making the most of any positive market movements then please get in touch with me at [email protected]