Strong start to the week for Pound Sterling – What could this week bring for exchange rates?

We have seen a strong start to the trading week for the Pound against every major currency, as Sterling exchange rates have bounced back from losses towards the end of last week.

The Pound did drop off at the back end of the week due to a fairly dovish tone set out by the Bank of England at the BOE interest rate decision, where the markets were informed not to expect as greater hike in interest rates in the coming months as had been originally predicted.

Interest rates are quite a focus in global markets at the moment, and this news led to a slight correction in the value of Sterling as investors hurried to align their positions with the new expectations of where UK interest rates may be in 2023.

Risk appetite also influencing the pound

Over the past few years and since the referendum result, Sterling has slowly but surely moved from a currency that used to often benefit in times of global uncertainty to one that seems to weaken when investors attitude to risk drops off.

We have effectively become deemed as a ‘riskier’ currency, so now when we see global issues like tensions building in the war, a global recession on the cards or the pandemic and covid starting to hit the headlines again you do tend to see the value of the pound fall away.

On the flip side to this when the markets do settle and the risk appetite comes back, this can now be really good for the Pound, albeit Sterling has this label of being a ‘riskier’ currency at present it still also has lots of factors that you could also deem it as a safe bet.

This week investors approach to risk seems to have increased and this is one of the reasons that Sterling exchange rates have advanced in Monday morning trading.

Factors like this do make the pound somewhat unpredictable, so it is more important than ever to make sure you have a helping hand should you be looking to buy or sell the pound in the coming weeks or months.

If you are in this position and want not only a great exchange rate but someone to guide you through the markets then feel free to email me directly on [email protected] and I will be happy to discuss your situation personally with you.

The week ahead

We have a fairly quiet week in the way of economic data for the UK this week, with the most notable information coming by way of the GDP (Growth) figures due out on Friday. It has been well documented that we are in for a long recession and that 2023 is unlikely to be a great year, but again the UK isn’t alone with this, so unless we see a significant surprise in numbers I feel this release will simply be confirming data we already know is coming.

Over the course of the week we have a number of members of the Bank of England speaking, these will likely throw up movement depending on the tone, different members of the BOE have their own opinions on what should be done next with interest rates and fiscal policy, but investors and speculators alike will be waiting on their every word to see if they can second guess plans for the next BOE move.

Finally, US midterms are voted on tomorrow, with my earlier comments on Sterling’s risk category these results could throw up some changes to risk appetite so be aware that despite the limited data this week it doesn’t mean the pound will remain stable.

I still feel there is a little patience on investors next move with Sterling whilst they await the budget plans on 17th November and to see what new PM Rishi Sunak and Chancellor Jeremy Hunt have planned.

They are still seen as a safer pair of hands (despite the media hype at the moment) so if they deliver a plan that can help turn around the UK deficit whilst not impacting people’s pockets to the detriment of the economy then this could give the pound a good solid boost.

We all also know what could happen if they get it wrong like the last Chancellor did, so as news starts to get leaked on their plans like it usually does, expect markets to react, that could happen anytime this week or into early next.

Once again, to be kept up to date with the very latest goings on for the Pound feel free to click here to register interest with the team here at Lumon (the writers of this blog) where you will be allocated a personal trader to help and guide you through the markets, whilst offering you and extremely competitive rate of exchange too. We look forward to helping you.