Pound Sterling Forecast – Will GBP Rise Further in August?

pound to euro: Will the U.K head into another lockdown?

The pound sterling forecast has risen as we finish the first week of August, after the Bank of England were less negative than expected in their August Interest Rate decision meeting. The news from the British central bank was still not particularly rosy but where some analysts had perhaps bet that they would be keener on further action, none was forthcoming.

The Bank of England still feel the UK economy will be bouncing back with some gusto but that it will take a very long time to see per-pandemic levels of employment and output. The pound had fallen as low as 1.1036 on the interbank rate this week, rising as high as 1.1132 during the week’s movements.

Looking further ahead, the UK will have many further troubles to contend with over not just the economic outlook but also Brexit, as investors keep a loose eye on the end of the year and the end of the transitional phase December 31st.

August can sometimes be a sleepier month because of the holiday season, but this year could be different since more people are staying at home and also the Coronavirus has changed the normal order of events.

What Can We Expect Next Week to Move the Pound?

Next week we will learn of some new developments in the UK economy which could well trigger some increased volatility. Of importance will be the latest news on the UK growth numbers with UK GDP (Gross Domestic Product) bound to be a real highlight.

Investors will be keen to see if the Bank of England have been correct this week in their assessments that the UK will be on a steady path to recovery, and that we are not likely to suddenly see another contraction.

The currency markets can prove very sensitive to economic news in usual times although the Coronavirus and Brexit have really changed the outlook.

Expectations for volatility might begin on Tuesday with the latest UK Unemployment data which is actually predicted to be 3.9% still, as the millions on the furlough scheme fail to show up in any hard data just yet, concerning the labour market.

Around the corner on Wednesday is when we have the latest GDP data for Q2 of this year which will provide further insight into how the economy of the UK has weathered this year, the expectation for April through to June is -1.6%, which considering that includes the month of April where we saw a -20% contraction could be worse.

Of course, it could also be better and the FX markets will no doubt be keen to receive the data in order to make a full assessment of how the UK is performing, and debate further the relative strength of the pound.

Whilst the Bank of England are not immediately considering any future policy actions, it is still a very real possibility and investors will be sure to assess the performance of the UK relative to the rest of the world.

What Can We Expect for the Rest of August for the Pound?

August is therefore a continued time of unease as we get some more vital data to highlight the relative strength of the UK and the pound. Expectations are not very high globally at present as the currency markets remain concerned at which direction events will take us.

On a range of topics we could still see many different paths and scenarios play out. On Brexit we could still see a deal reached to smooth UK-EU relations, or we might still see a no-deal exit, with potentially dire predictions for the pound.

On the subject of the Coronavirus, we eagerly await signs that the worst is over but globally and within the UK there are continued reports of fresh cases with Germany posting the most number of daily cases since May this week, the UK announcing a lockdown for Preston, and the UK imposing further quarantine on more overseas destinations coming to the UK.

The currency markets are presenting financial markets with many issues to debate that can influence your sterling exchange rate. For a more comprehensive breakdown of what lies ahead and what we might expect please do get in touch.

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