Don’t look a gift horse in the mouth
19 July, 2013
As we come to the end of the week, we find the Pound in a slightly better position than we might have expected with the data that was due. The Pound started the week off as many anticipated – on the back foot – following the Bank of England’s clear indication interest rates would stay low for a very long time, and this was further compounded when inflation data came out high again on Tuesday. The Pound dropped away against both the Euro and the Dollar, hitting lows not seen since March.
Then came the surprise.
The Bank of England minutes from this month’s meeting came out on Wednesday. Following the actual meeting statement at the start of the month, this was widely tipped to be Sterling negative, with concerns that more Quantitative Easing and certainly more insight through Forward Guidance would be on the cards. The markets are not used to the Bank being so open on policy and so more bad news was expected. However, no one had anticipated the vote for more QE to be 9-0 against, a clear change from the recent votes of 6-3 against and a clear indication the Mark Carney has the whole MPC reading from the same hymn sheet and that further Sterling diluting QE is not on the cards any time soon. The Pound jumped up on this news, and coupled with some slightly more positive unemployment numbers and retail sales figures has consolidated to a reasonably good position, given where we were and what was expected.
Today there is an almost complete absence of any data of note, apart from UK public sector net borrowing and later some inflation numbers in Canada.
So for all of you currency buyers who have Sterling in hand and need to sort out your exchange in the coming days or weeks, to send your money overseas, you should consider whether an unexpected rise in rates like this is a good opportunity given the recent negative feeling towards the Pound and an uncertain future.
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