Carney Effect continues as Pound holds on to improvements

If August is supposed to be a quiet month when much of the world is on holiday, nobody seems to have told the foreign exchange markets. After a June and July which saw the Pound stuck in tight ranges against many currencies, we have seen tremendous volatility this week, with exchange rates bouncing all over the place and offering opportunities for improvements in rates for many.

Sterling yesterday hit its best rate against the US Dollar since mid June, and against the Euro since mid July. There were also improvements against the South African Rand and Australian and Canadian Dollars as the effects of new Bank of England Governor Mark Carney’s policy on forward guidance fell into place. Although interest rates will be low in the UK for some time (Pound-negative), the signs of economic recovery are increasingly good, which along with a clearer monetary policy seem to have given the Pound some momentum.

Yesterday the OECD also said that the UK recovery was “firming” in June, as Mr Carney gave interviews claiming that his new regime should help to boost UK output in the coming months.

Today, the only scheduled news of note is the UK trade balance (9.30am) and Canadian unemployment figures (1.30pm) so it may be a day to take stock and decide if now is the right time to secure an exchange rate for your own transaction. Next week we have the key monthly UK inflation figures due out on Tuesday, and the Pound certainly seems vulnerable to give back its gains with any bad news in the current market.

If you would like to save money on your overseas transactions, let Currency Index help you today.