Busy week Sterling finishes strongest
18 March, 2016
A busy week draws to a close today, following some major moves on the currency market with the Pound taking centre stage for many of the key pieces of news.
The first big news came on Wednesday when Chancellor George Osborne delivered the budget for the UK. The budget is often not a very big mover of the currency markets because it mainly focuses on economic intricacies, such as specific tax points, which frankly aren’t of much interest to large volume international investors. But on this occasion the markets were given quite a lot of insight into growth forecasts, or more to the point the lowering of growth forecasts and as a result the Pound dropped across the board in the hours following the budget.
More doom and gloom was anticipated yesterday with the Bank of England’s monthly policy statement due out. While no changes to policy were expected the minutes are always of interest to see how the vote was split and critically whether any further comment on growth forecasts or future interest rate policy was made. The Bank specifically highlighted that the recent drop in Sterling – 10% against the Euro – was largely due to uncertainty over June’s EU referendum, and also echoed the Chancellor’s lowering of growth forecasts. However on interest rates there was a very small glimmer of positivity. The Bank commented that interest rates are “more likely than not to rise over the coming two years”. This is pretty vague and not particularly positive, but with the backdrop of the ECB cutting interest rates and the US Federal Reserve setting a very dovish tone towards their own interest rate position on Wednesday evening, the markets jumped on this and Sterling rallied by 1.5 cents against the Euro and more than 2 cents against the Dollar.
Today sees an almost complete lack of data of note apart from a couple of Canadian inflation releases later this afternoon. Yesterday’s surprising jump in Sterling strength is a great opportunity to look at securing your currency if you have an upcoming purchase. The uncertainty and fear caused by the referendum is still very much the driver of the markets, and so spikes such as this are likely to be short lived. Make sure you speak to your Currency Index account manager today to discuss your upcoming requirement and how we can help you to secure the currency while the rates are on a high.
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