Pound Sterling Forecast: Will the Pound Be Lower During This Shorter Week for the UK?

GBP EUR Exchange Rate: The Week Ahead June 12th

The UK is enjoying a shorter working week because of VE Day on Friday, with the typical May Bank Holiday being changed to accommodate the 75-year anniversary of the end of the Second world war. Some of the key topics to consider this week are the Services data today, the Bank of England interest rate decision 7 am on Thursday and the update on the UK’s lockdown status by PM Boris Johnson on Thursday and again on Sunday.

The pound has been finding itself more at the mercy of events globally than any specific domestic issues for the UK. Whilst of course Coronavirus continues to be the main topic globally, sterling has been caught up in more global movements on currency with investors at times ignoring some of the troubling domestic data, simply because it is expected.

Today is a good test of such behaviour with the latest vital data for the UK Services Industry, often a key market mover since the Services sector makes up around 80% of the UK economy. The release is predicted to come in at 12.3 on a scale of 1 to 100, where anything below 50 represents contraction, which would be a record low.

We have already had economic data overnight with the RBA (Reserve Bank of Australia) interest rates decision where interest rates were kept on hold with their record lows of 0.25%, although the Australian central bank did warn of uncertainty ahead.

Monday of this week did not see too much volatility for the pound, perhaps as last week was both the US and Eurozone interest rates, where there was an undoubted extra focus on the euro and the US dollar. Movement on EURUSD exchange rates is important for the pound since any big swings on EURUSD can drag the pound lower or higher against each of these currencies on GBPEUR and GBPUSD. This was the case on Friday where a weaker US dollar caused the Euro to rise to fresh highs against the pound.

The Services data release has the potential to bring the focus back on the UK and the pound before we have the latest US Non-Manufacturing PMI data for the United States is released at 13.30. Then tomorrow, we have Services and Retail Sales data for the Eurozone.

It does feel like the currency market movements have become less volatile in the last few weeks, March saw some excessive movements and volatility for the pound with 10 cents movement between the high and the low on the interbank rate for GBPEUR whilst April saw only 3 cents movement. On GBPUSD March saw 16 cents movement high to low whilst April saw 4.5 cents.

What Are Some of the Important Trends Ahead for the Pound?

For the pound investors must take stock of the continued variations in the global attitudes and sentiments on the coronavirus and the effects on the pound. Sterling has been rising and falling not just on economic news and performance of the UK in combatting the crisis, but also to do with rising and falling global sentiment towards how the world is tackling the crisis.

A good example to illustrate this is with the US dollar, since the US dollar is a safe haven currency which in times of increased fear and uncertainty will appreciate in value. Such behaviour has been displayed on numerous occasions since the onset of the global pandemic, and often when the US dollar has risen in value sterling has fallen. This is because the news that is making the dollar strong is not helping to create an environment in which we might expect the pound and UK economy would perform well.

And in displaying such behaviour, the opposite is true. So we have seen the pound rising when there is more optimism over the global progress being achieved in tackling the coronavirus. And this has seen the US dollar weaker as investors have confidence to invest elsewhere.

So far, the UK has been one of the worst affected countries with the lockdown still in place and likely to remain in place after the next firm government update on Sunday, with Thursday also being an important date as Boris provides some updates.

Thursday is also important since the Bank of England have their latest interest rate decision released, at the very early time of 7 am. The meeting has been brought forward for the Bank of England to announce their latest economic forecasts and minutes of the Financial Policy Committee which has been brought forward due to the coronavirus.

Andrew Bailey, Governor of the Bank of England will then give a speech at 9 am which might have market moving potential. If you are considering any currency transfers involving the pound, the end of this week has some events which could easily lead to volatility and making plans ahead and around such volatility could be a smart move.

If you have an upcoming currency transfer to consider and wish to better understand how these releases may influence the value of your currency exchange please speak to us to learn more.