What will drive the pound for the rest of May?

Pound sterling exchanges rates have largely been driven by interest rate expectations this week which has seen the pound rising and then falling as investors try to second-guess the outcome and plans for the future. The raising and lowering of an interest rate is a key driver on the currency markets, the pound has now lost value as the Bank of England indicate that any hike will not take place until possibly 2019.

I would suggest this current lull for sterling is probably a dip worth buying on since the likelihood of further improvements for sterling is high. The poor weather was a reason for the lack of any hike this week and if this data is shown to be better the chances of a hike will likely improve. Next week is the latest UK Unemployment data which may well be a market mover, the end of the month sees the latest GDP revisions.

The pound could still stage a recovery, these sentiments shift very quickly. It was only 3 weeks ago everyone was expecting it to be a dead certainty the Bank of England would have raised interest rates this week. Clients looking to buy or sell the pound should be making careful plans around future economic data would act as a trigger to further volatility.

The general positive impressions we are getting from the markets over sterling could now continue even if the economic data isn’t so impressive and we are also struggling to see lots of constructive progress over Brexit. That is because the general trend on both issues is forward facing rather than backward, this will help investors to have confidence over the longer term.

On Brexit, there are concerns over the difficulties to reach an agreement over the Customs Union proposals but it is still expected some form of agreement will be reached. There is still time to reach an agreement and one side of the May Government to accept whatever is proposed. On interest rates, Mark Carney did hint that he is likely to raise them in the future if not this year so it should still happen

If you have a transfer buying or selling the pound making plans around these key important events is vital to understanding your exchange and being able to manage your transfer in the most efficient way. For more information please contact me Jonathan Watson on jmw@currencies.co.uk.

Thank you or reading and I look forward to hearing from you.