Sterling exchange rates still remain under pressure, notably from political developments regarding Brexit and from economic developments with the Bank of England. As a result, the GBP/EUR rate in particular has failed to breach the 1.14 mark now for roughly around a week. With a host of economic data out this week amidst political developments – the most commonly asked question should be, “what is going to cause Sterling exchange rates to start to move”?
Today the main story for the UK was the Bank of England raising pressure on UK lenders to be more vigilant when offering credit. This comes at a time when consumer spending in the UK is high and wage growth is cooling, so this may be more of a precaution to UK lenders before they incur heavy losses, such as what happened in the financial crisis. Personally, I think this news is being released as a way of potentially dealing with inflation in the UK before they look at raising interest rates.
Furthermore, the decision regarding interest rates continues to divide the voting members of the MPC at the Bank of England, with Ian McCafferty stating it would be a good idea to act quickly – whilst Gertjan Vlieghe opposed this by saying it would be best to wait in the eyes of a cooling economy.
Recent Construction data for the UK showed a slowdown in June with many analysts claiming that Brexit is causing a headache for many developers when it comes to committing to new projects. I feel that until we get some clarity regarding the future of the UK interest rate – I wouldn’t be surprised to see the Pound suppressed.