With Christmas now less than the week away, the Pound’s current position against the Euro and Australian Dollar remains favourable considering the mammoth task the UK faces in withdrawing its membership from the EU early next year. However against the US Dollar, it remains close to its decade lows as the prospect of further US interest rate hikes in 2017 stirs appetite for USD.
The Pound continues to hang in the balance this side of Christmas, although we are not expecting any Brexit updates for now, 3 key economic releases this week have the potential to shape GBP exchange rates further.
Since the Autumn Statement by the Chancellor Philip Hammond, increased public spending to mitigate risk of economic slowdown is a likely concept the UK will have to get used to, and whilst on the surface this may seem an appropriate action by Government, Wednesday’s Public Sector Net Borrowing’s could be the beginning of more debt for the UK, with a higher reading deemed negative for the Pound.
The UK may have to face higher consumer prices as a result of a weaker Pound Sterling, a message echoed by the Bank Of England’s Mark Carney. The real affects of Brexit are yet to unravel but the media’s coverage of higher consumer prices following the Marmigate fiasco are just a few early signs of what Brexit could entail. It’s plausible therefore, to assume that Thursday’s Consumer Confidence from Gfk could spell more bad news for the consumer confidence survey, and more bad news for Pound Sterling.
Friday’s GDP figures are not likely to portray any shocks, a lot of the guess work for Q3 was done earlier in the year. The economy grew .5% in Q3 compared with Q2, with projections of 2.3% YOY. With inflation now well within the BoE’s 2% range, the prospect of further interest rate cuts looks unlikely for now.
The Pound is unlikely to make significant gains this side of Christmas, and may find itself at the lower end of 1.19 against the Euro and 1.24 against the US Dollar if economic data bears negative this week. GBP/AUD exchange rates could be an exception if the RBA cut interest rates following their worst GDP figures for Q3 in 5 years.