Further woes for Sterling

23 March, 2016

Rob Bastin

Tuesday’s trading was another bad day for the pound, as the negative trend is continuing to drive Sterling exchange rates even lower. The pound has dropped 2 cents against the Euro since Friday and 3 cents against the US Dollar. This drop comes to no surprise after recent weeks saw the best buying levels for sterling exchange rates since January. Resuming the downward trend was however aided by the economic releases in the morning session. Euro-zone Services and Composite PMI both exceeded market expectations for growth but it was the UK figures that really moved the markets. UK inflation was unchanged on the annual figure posting 0.3% growth and 1.2% for Core inflation, however the monthly figure for February was expected to be up at 0.4% but actual results only came in at 0.2%, continuing concerns that inflation levels are not recovering at the speed the Bank of England would wish. Without a rise in inflation the UK cannot see a rise in interest rates and so the pound dropped across the board throughout yesterday’s trading.

With disappointing economic figures and the political concern of the summer referendum, it is currently very difficult to imagine any turn around in these exchanges for a number of months. With Sterling’s correction phase now seemingly over, anyone who missed the boat on the better buying levels may wish to consider cutting their losses in the short term. Contact your broker today to discuss different options available to you to help with this, including Forward Contracts and Limit Orders.

Today is a very quiet day on the markets with only 1 announcement this afternoon for US New Home Sales at 2pm. UK Retail Sales tomorrow is the only glimmer of hope for this week, however forecasts are for a sharp drop from last month so this data has as much chance of making the situation even worse for Sterling.