Sterling enjoys light relief

For those with sterling making an overseas transfer, the prospect of making the transfer has been fairly daunting of late as rates plummeted down to 5 year lows.

The past 24 hours has seen some respite though, with many taking advantage as we have seen a 2 cents reprise helped by the inflation reading Tuesday and the unemployment figures yesterday. The unemployment figure came out as expected, while the number of new job seekers claiming benefit rose by much less than expected, with average earnings showing a better than expected figure of 2.3 percent.

The US dollar had a mixed day as the pound started off well against it and continued over the day finishing back where it started as US new home starts and building permits overachieved and underachieved forecasts respectively. The main North American news came from above the US border though as we saw the release of the Royal Bank of Canada interest rate decision and policy statement. As expected the Bank held rates at 0.5 percent giving the loonie a boost of over a cent against sterling. This was short lived though as the policy statement mentioned they were cutting their GDP outlook to 1.1 percent for this year and to 2 percent for next year. The Bank cited the economy would not reach full capacity until 2018/19 meaning future rate hikes would be delayed, citing weak business investment and angst over the US election were affecting exports. As this was digested the loonie lost all its gains and returned back from where it came, the proverbial tale between its legs.

As the day came to a close and the European markets closed the pound took a slight nosedive losing nearly half a euro cent and over half a US dollar, proving that sentiment is still far from anywhere near the pound and highlighting the fact that when we see a spike, it’s worth taking advantage as they tend not to last. With that in mind, anyone who didn’t take advantage of the recent 2 cent gain might want to cut their losses and get their transfer done sooner rather than later in case all the gains correct over the rest of the week.

The data coming out today to help or hinder the rates is the UK retail sales, followed at lunchtime by the ECB interest rate setting meet. The question there as to whether they tinker or not with the interest rates and /or their QE program. There are some low key US releases mid-afternoon but nothing to write home about so come lunch, the direction of trade will likely be known. Make sure you keep your comms open so the team can update you on the rates and guide you through your upcoming transfer.