The Pound made a positive move yesterday, gaining value against most of the major currencies. GBP/EUR exchange rates have touched 1.1281, whilst GBP/USD rates hit 1.3995.
Whilst it has yet to make any further inroads this morning, it seems that investor confidence in the UK economy was boosted following Chancellor Philip Hammond’s Spring Statement, which he delivered yesterday. This was seemingly well received by the markets, with the Pound benefitting as a result.
The key points from the Statement were centred around stronger UK economic growth than was initially predicted. This improvement was despite the on-going market concerns around Brexit, with UK Gross Domestic Product (GDP) forecasts upgraded from 1.4% to 1.5%. Whilst this was only a modest improvement, the Government also expect borrowing to decrease throughout the year and inflation to fall back to their 2% target by 2019.
Sterling made impressive gains against the commodity based currencies, in particular the Canadian Dollar. The GBP/CAD rate was back above 1.81 and despite the Loonie finding some support around this level, Sterling has in fact gained over 7% against is CAD counterpart since the turn of the year.
The Pound was also putting pressure back on 1.13 against the EUR, but with the European Central Bank (ECB) remaining as bullish as ever in their recent address, I am not anticipating an aggressive move above this threshold over the coming days.
GBP/USD rates also spiked, with the USD coming under pressure since a weak US wage growth report, which cast doubt over whether the US Fed would raise interest rates at their next policy meeting on March 21st.
Up until this report the US economy had seemingly been on a constant upward curve, which meant investors started to factor in multiple interest rate hikes this year, which helped support the Dollar’s rise. However a run of mixed economic data and President Donald Trump’s current ‘trade wars’, have put pressure back on the greenback and this has helped inadvertently boost Sterling / US Dollar rates as a result.
With investors moving their funds away from the USD over the past couple of days, Sterling has benefitted and it now seems as though the Pound could once again move through 1.40, which has become a key threshold for the GBP/USD pair.
However, a word of caution as this trend may not last should the FED decide to hike interest rates later this month. This possibility, alongside the underlying concerns surrounding Brexit negotiations and which direction the UK economy will take over the coming months could easily put pressure back on the Pound.
In fact if we look at recent trends on the pair this is exactly what has happened and therefore it may be prudent to take advantage of the current spike and remove any risk from any upcoming Sterling currency exchange.
With so much uncertainty around Brexit continuing to restrict any aggressive sustainable gains for GBP, short-term opportunities like this should not be discarded.
Foreign Currency Direct produce a monthly currency forecast which is free to download and could be a useful resource for anyone looking to make a currency transfer. You can download the monthly currency forecast here.