Exchange Rate Forecast

Exchange rate forecasts and foreign currency news

Will Sterling’s charge continue?

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The Pound received a very welcome boost last week following comments that ‘some withdrawal of stimulus was likely to be appropriate over the coming months’ by Bank of England Governor Mark Carney and the Monetary Policy Committee member who was previously maybe the most dovish on interest rates, Gertjan Vlieghe. This certainly helped to solidify the comments and Sterling’s value which rose dramatically. Sterling has retreated ever so slightly today as investors have wound up bets this morning on both the Dollar and Euro from last week.

Economic data this week

This week the British consumer comes into focus as UK Retail Sales figures will be released on Wednesday. This is followed by Public Sector Net Borrowing figures that will be released on Thursday. Following last week’s interest rate news I would expect these economic releases to carry further importance and could create large swings in Sterling’s value if these are different from what is expected. A slight drop is expected in these figures but these are definitely two events to watch closely.

Sterling value for the rest of the week

The important focus this week will be on Theresa May’s speech scheduled for Friday. She is likely to address the Brexit negotiations that have been postponed to the week of September 25th.

Some of leading companies based in the UK have written a letter to the Confederation of British Industry (CBI) asking for a year 3 year transitional deal to protect the jobs in Britain and Europe. If Theresa May confirms this I wouldn’t be surprised to see Sterling’s value increase again.

It’s worth noting that previous speeches regarding Brexit have helped to strengthen Sterling’s value. In my opinion, I would expect Sterling to remain at current levels, 1.13 versus the Euro and 1.35 against the US Dollar as markets prepare for Friday.

Sterling soars after Bank of England drops hint of a rate hike

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The Pound has surged this week after a number of key comments from the Bank of England (BoE) have buoyed markets.

The Pound’s increase begun earlier this week after some higher than expected inflation figures gave those watching the Pound hope that the BoE would raise the subject of high inflation and how to deal with it.

The inflation figure of 2.9% was the joint highest out this year, as the last time this figure was reached was back in May. Since then the BoE has chosen to keep interest rates on hold for now, but there is the chance of a rate hike in just the next few months which is why we’re seeing the Pound soar and the buying of foreign currencies using Pounds become much less costly.

Yesterday, Mark Carney, who is the Governor of the BoE alluded to a increase in the UK interest rate in the next few months in order to deal with the inflationary pressures, and there is also talk of reigning in the current Quantitative Easing (QE) program.

The reason this has caused such a reaction from the Pound is because previously the plan was to raise interest rates in 2019, so markets are currently re-evaluating the Pound’s value and pricing in the rate hike as it seems like there could now be one this year.

The Pound is now trading at well over a 6-week high against the Euro, and against the US Dollar the Pound has hit a 1-year high, with the US Dollar coming under pressure at the same time the Pound has been boosted.

The Pound has been further boosted today after another BoE member, this time Gertjan Vlieghe, mentioned that the interest rate may need to be hiked more than once if the economy develops as expected.