The pound to euro interbank exchange rate saw increased volatility this week as the market debated the possibility of future interest rate cuts for the UK. Any potential for an interest rate change can have an influence in the currency market, by creating increased or decreased demand for the respective currency. Learn more on what happened to sterling this week here.
Historically speaking, the cutting of interest rates (or the mere mention of this), has seen the pound lose value, and so it was the case last week as a series of Bank of England policymakers indicated a cut was a real possibility.
What Will Affect Sterling Exchange Rates?
Looking to the week ahead and what might move the rates, investors will be closely monitoring any UK data which might demonstrate the suitability of the Bank of England to be considering a cut.
Tuesday morning sees the latest UK Unemployment data, a key concern in the currency market and for the UK economy. With all UK data now likely to be viewed through the lens of the Bank of England’s monetary policy committee, any deviation from the current 3.9% rate of unemployment for the UK could prove pivotal. A positive outcome from this reading may see rates climb as a BoE interest rate cut could be less likely.
Wednesday is the latest PSNB, Public Sector Net Borrowing, representing any government borrowing that has taken place. There is pressure on the new Conservative government to live up to the high expectations to deliver on rejuvenation in many northern UK constituencies, the performance of the government’s borrowing levels here could prove influential.
January 30th is shaping up to be a key date, as investors debate the possibility of a UK interest rate cut. With the market predicting a 70% chance of this last week, the upcoming UK data will contain plenty of potential to alter the perception by investors on this ultimate outcome.
If you have any GBP/EUR currency transfers to consider and wish to be kept up to date with all the events and news in the market ahead of this potential crucial time. Feel free to contact myself, Jonathan Watson, using the form below.