The release of this mornings PMI construction data provides further confusion over the results of the Referendum. Although business and consumer appears down, this mornings release came in only marginally lower than June’s release and much better than predicted. We are still yet to see the impact of Brexit through the economic releases, how will this impact the Bank of England’s decision on Thursday?
Do the economic conditions justify a rate cut?
If the Bank of England were to cut rates on Thursday, Pound to Euro conversion rates could fall below 1.15, but will they likely cut rates? Although it is predicted by many they will, I personally cannot see why at this stage a rate cut is necessary, given the lack of quantifiable data.
If anything, the current economic releases do not support a cut and Mark Carney may adopt a ‘wait and see’ approach again. If he does, we may see a slight perk in GBPEUR exchange rates, positive news for the UK economy does however have limited impact in the wake of Brexit.
Regardless of the outcome of tomorrow, it is also predicted that Carney will downgrade his forecasts for growth which could lead to further Sterling weakness.
Should I wait until next week to buy Euros?
Next Tuesday’s NIESR GDP estimates report on the growth for the last 3 month’s, which will include data after the referendum vote.
This report will be a true indicator of how Brexit is impacting growth and could cause high volatility, investors will likely be awaiting the results before deciding on whether the UK is a safe place for investment.
It may also be a trigger for the Bank of England to act to stabilise growth in the form of further interest rate cuts or further stimulus.
If you are looking to buy Euros in the near future, doing so ahead of the interest rate decision on Thursday could prevent further losses to your Euro needs.