Sterling exchange rates have continued to climb steadily this week, as positive sentiment surrounding the UK continues to increase despite a potentially key end to the year for the UK moving forward. The headline grabber is likely to be the 9-month high for cable, which is a reference to the GBPUSD exchange rate. This has taken place as the pound is climbing across the board of major currency pairs whereas the US dollar has been weakening, hence the steep upward movements for GBPUSD in recent months. GBPUSD has climbed by over 6% in the past quarter, and with the pair trading around 1.33 at the moment they are just a couple of cents from the annual highs of 1.3515.
We’ve seen a boost to sentiment towards the UK and the pound’s value for a few reasons, one of the mains reasons in the financial headlines pertains to the strong property market within the UK at present. Mortgage approvals for July exceeded expectations after rising by over 66k, and according to Nationwide, house prices rose in August by their highest amount in 16-years. The drops in May and June have been reversed, and they’re now sitting at all time highs according to one of the UK’s largest lenders.
News came out this morning that new mortgage approvals are a concern as lenders tighten their offerings due to concerns over the property market in future due to job instability, but in general the mood is positive. Nationwide commented that the increased activity in the sector has been ‘unexpectedly rapid’.
UK household spending has also increased according to data released by the Bank of England earlier this week, and last month we found out that Retail Sales within the UK are also improving which is great news for the UK owing to the services sector covering around 80% of the UK economy.
Covid-19 remains an ongoing issue, especially as we head into winter which is expected to bring above further waves of the coronavirus strain. At present a number of European countries appear to be having second waves already making it difficult for the aviation sector to get back up and running. Updates regarding the virus carry the potential to impact Sterling exchange rates as we saw earlier this year. When news broke of the seriousness of the COVID-19 impact UK stock market’s and the pound were targeted and the GBPUSD rate fell to the lowest level in over 30-years, with the pair falling as low as 1.15, which is 18-cents from their current position.
To end the week economic data out of the UK is actually very light, with tomorrows speech from the Bank of England’s Michael Saunders being perhaps the key moment as the markets will look out for references to future monetary policy from the BoE.
Over in the US though there could be a busy end to the week, as the monthly Non-Farm Payrolls will be released on Friday along with the unemployment rate. This monthly release covers the health of the jobs sector stateside with the exception of agricultural jobs, hence the term non-farm. This release carries the potential to cause big market swings owing to the significance and with EURUSD being the most frequently traded pair, there can be an influence on the Euro as a result of the release.
The Euro has also been strengthening against the US Dollar and there are expectations that the European Central Bank may step in the curtail the strengthening EUR/USD rate in case it makes the Eurozone less competitive. This could also have an impact on GBPEUR so this is another topic to be aware of it you’re monitoring the pound’s value.
Aside from this week’s data I think that September and early October could be key for the UK moving forward, as trade talks between the UK and EU negotiators are expected to lead up until early October. The UK is in the process of departing the EU and the current transitional deal expires at the end of the year. Hopes are for the deal to be agreed upon by October so there could be market movement depending on the outcome of the talks and the headlines surrounding them. Get in touch using the form below if you’d like to discuss these factors in more detail. I’ll be happy to contact you personally and discuss your enquiry.