Bleak outlook for Sterling

23 May, 2013

Tom Arnold

And so the storm begins…

Tuesday’s inflation figures provided the Bank of England with the necessary breathing space to increase their QE policy by a further 25bn over the coming months. The pound began to drop across the board as this expectation builds, and yesterdays Bank of England minutes only lent to support this expectation with confirmation that 3 of 9 MPC members voted for an increase in QE for the 4th consecutive month. UK Retail Sales figures also released yesterday came well below the consensus, posting growth of just 0.5% over the year compared an expected 2%. Needless to say the pound came under further pressure during yesterday’s trading losing another cent against the Euro and 1.5 cents against the USD.

After some scattered optimism in previous weeks it seems the immediate outlook for the pound is becoming increasingly negative, with the downward trend set to continue against most major currencies. A view that seems to be shared by the IMF who yesterday came out and announced that the UK economy “is still a long way from a strong and sustainable recovery”. This morning at 9:30am the revised GDP figures for the UK will be announced, and any downward revision of the 0.3% growth posted last month would complete a hat-trick of bad news for the pound this week. At best any good results could provide some short relief and buying opportunities in a dropping market.

Protect your future currency

When pessimism takes over the currency markets they can be very cruel, as demonstrated in January when GBP/EUR rates lost 9 cents in just 4 weeks. With the recent turn of events anyone with an up and coming requirement for sending money overseas may wish to consider either bringing forward your transfer, or speaking to your broker about a FORWARD CONTRACT enabling you to secure your currency at the current trading levels.