The Pound has recently hit the best exchange rate to buy Euros in eleven months but has subsequently come under pressure since the middle of this week.
On Wednesday the Pound started to fall owing to lower than expected inflation which means that the interest rate hike in May could potentially be delayed. However, average wages have surpassed inflation for the first time in over a year and this was why the recent high was hit.
Bank of England governor Mark Carney spoke last night and suggested that although interest rates will be going up the pace may not be as quick as some may expect and this caused the Pound to fall vs the single currency in early morning trading.
Since then Sterling exchange rates have fought back and I think this could continue. Clearly Carney’s tone was a little negative but overall the UK economy has been showing positive signs recently and one of the sticking points continues to be the uncertainty caused by Brexit and this will take a long time before we get anywhere near any kind of resolution.
Another Bank of England member Michael Saunders has said signs of a UK slowdown is ‘questionable.’ Saunders has also claimed that he will be looking to vote for a rate hike as he did previously. His justification is that although retail sales fell recently this was caused by the unusually heavy snow rather than a lack of confidence in the UK economy.
With the first estimate of UK GDP for the first quarter due out next week we could see a fall but Saunders has suggested that previous Q1 estimates have often been revised upwards. Therefore, I think we could see a lot of movement for the Pound vs the Euro during next week so make sure you’re well prepared.