Currency news update from Currencies Direct

  • Uncertainty economic outlook slows pound Sterling advance

    Staying on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for over the next couple of weeks…

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    Despite uncertainty surrounding the UK economic outlook, pound Sterling was able to climb higher over the past fortnight.

    GBP/EUR started by sinking to a low of €1.1223, but was then able to climb higher – albeit with a few bumps in the road – to a high of €1.1398 over the following days.

    GBP/USD lost its footing as the weekend before last approached, dropping to a low of US$1.3861, but has since rebounded to a high of US$1.4064.

    EUR/GBP started the past fortnight around a high of £0.8866, but has now fallen to a low of £0.8773. EUR/USD, meanwhile, traded between a high of US$1.2414 and a low of US$1.2261.

    What’s been happening?

    It hasn’t been a smooth ride, but pound Sterling has been able to record notable gains over the course of the past fortnight.

    The UK economy continued to play its favourite game; providing mixed data to keep the economic outlook balanced on a knife-edge.

    For instance, January inflation figures beat forecasts upon release on the 13th, with core price growth recovering from 2.5% to 2.7% and overall price growth holding steady at 3% instead of falling to 2.9% as predicted.

    However, the latest retail sales and fourth-quarter GDP data has disappointed forecasts.

    The former improved the odds of a May rate hike from the Bank of England (BoE), while the latter lowered them again.

    Markets were disappointed when several members of the Monetary Policy Committee (MPC), including BoE Governor Mark Carney, appeared together to discuss the interest rate outlook last week.

    While Carney suggested that the BoE may need to hike interest rates more than predicted a few months ago over the course of the next three years, he also avoided being pinned down over the timing of the rate hikes, dampening hopes the MPC may be about to tighten monetary policy in May.

    Things on the Brexit front are starting looking a little rosier, however, after Business Insider reported that the EU Parliament was putting together a 60-page resolution that would suggest the UK received ‘privileged’ access to the single market after Brexit.

    Additionally the UK Cabinet has seemingly managed to thrash out an agreement regarding the government’s approach to trade negotiations next month, providing some much-needed unity and clarity on the entire process.

    What do you need to look out for?

    Things get interesting at the end of this week, when IHS Markit releases its next manufacturing and construction indices, building up to the vital services PMI on Monday 5th March.

    On Friday BoE Governor Mark Carney will speak at Economics Conference in Edinburgh – signs that he is supports an interest rate hike in May would boost GBP.

    Prime Minister Theresa May is set to get a speech this week in which she sets out the government’s aims for transitional periods and post-Brexit trade. The more her Cabinet’s plans seem to be leaning towards a ‘Hard Brexit’ the more likely it is that the Pound will fall.

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