Sterling exchange rates were pretty flat throughout the last week, leaving many sterling sellers and buyers frustrated - especially those buying or selling against the euro. The only real movement that we saw was GBP/USD exchange rates going back to the 1.31 area following the Fed meeting, however, the GBPEUR exchange rate is still at 1.11 or thereabouts.
Throughout June and July, the main market mover for the pound was talks of an interest rate hike by the Bank of England. Each member came out one by one giving their views on the situation, causing the pound to fall by around 3% as some members strongly stated an interest rate hike is not a wise idea. The main reason this all came about was due to rising inflation in the UK, and if any of you saw our latest inflation figures - this is no longer the case.
Logic tells me that the BoE is no longer under as much pressure to hike rates, for now, so I am expecting fewer members to vote for one. At the last meeting, 3 of the 8 members voted for a rate hike, which was extremely bullish for the pound, This month I feel that this could now drop - which would probably cause the pound to weaken across the board. It is for this reason that I feel Thursday will be the most volatile day of the week, and for clients trading with the pound, I urge you to try and steer clear of this day as the BoE can be very unpredictable, especially in our current economic climate.
Aside from the BoE meeting, there are plenty of other highlights this week that could have an effect on the exchange rates. The first being on Monday morning when the UK will release their mortgage approval figures, which are expected to show fewer mortgages have gone through over the last month- the reason this is important is mortgage approvals and the UK property market are parallel, if mortgage approvals slow down - eventually, so does the property market. Though this isn’t an extremely important data release, I feel that this could begin to soften the pound, especially when traders will be selling off in anticipation for Thursday.
For those of you converting sterling and euros, another important release will be the eurozone’s GDP figures on Tuesday. The IMF recently upgraded the eurozone’s growth forecast (at the same time, revising down the UK and USA’s) so it will be no surprise that the yearly figure is higher, however if we see a stronger Quarterly figure then it is possible that the euro will strengthen on the back of this.
Finally, on Friday the US will release their notoriously unpredictable nonfarm payrolls data. The US dollar is weakening due to softening data and political instability, we are expecting a weak figure to come in this week, but NFP data rarely comes in as expected, so though it may be tempting to trade the release, it may be worth securing your dollar transactions before or after this release.