Over the last 18 months Brexit related stories have stolen the headlines and had a major impact on sterling exchange rates, and I am confident this trend will continue in the months to come. Nevertheless this week the UK are set to release a host of economic data which could have a major impact on sterling exchange rates moving forward.
Tomorrow Consumer Price Index numbers, also commonly known as inflation, is set to be released at 9.30am. Inflation has been on the rise over the last 12 months due to the devaluation of sterling exchange rates. At present inflation is floating 0.6% above the Bank of England’s target of 2% and the consensus is for a rise by 0.2%. If this materialises this could put pressure on the Bank of England to debate raising interest rates and therefore a slight rise in sterling exchange rates could be on the horizon.
On Thursday afternoon the Bank of England will release their latest interest decision and no change is expected. I therefore expect minimal movement off the back of the release. However, Governor Mark Carney will give his thoughts shortly after and this tends to be a volatile period.
The problem the Bank of England have at the moment is that inflation is outpacing wage growth which is having an impact on the Great British public’s pocket. The Bank of England need to decide whether they are happy with high inflation and low interest rates or higher interest rates but a disgruntled great British public due to paying higher rates on debt.
Personally I expect Mark Carney to continue to state that Brexit negotiations will continue to have an impact on the Bank of England’s monetary policy decisions and interest rates will remain on hold for the time being. Therefore, with the data releases due this week I expect sterling exchange rates to be at their highest levels at some point tomorrow or Wednesday.