GBP ‘deflated’ as rates drop further

15 October, 2015

Matthew Boyle

Yesterday’s main news came in the morning as the UK headline inflation figure came in at -0.1% down from its expected figure of 0.0%. Having been linked so heavily with any UK interest rate hikes this news only pushes this hike date further back and as such the pound lost ground.

Throughout the day’s trading the pound lost nearly 2 cents against EUR, although in the afternoon we did see a small recovery ending the day’s trading at just under a cent and a half loss against the single currency. This is dire news for many Euro buyers as we have now seen the pound lose nearly 10 cents in the last month. And, unfortunately with this slowdown in inflation likely pushing further back any interest rate hike in the UK the market is braced for further losses in the short –term as it may take time for GBP to regain its lost momentum.

The main winner of the Day was EUR which released ZEW economic ecostats early morning, interestingly seeing the normal Euro stronghold that is Germany releasing a lower than expected result whilst the Eurozone figure as a whole came in as expected. Certainly in recent weeks the Euro has been strong and this figure could well demonstrate that some of the weaker member states are now beginning to perform more effectively. This was shown throughout the throughout the day as aside from its gains against GBP it also gained against the USD, stealing a near half a cent throughout trading and taking its gains against the greenback in the last week to just under 2 cents.

Today we have a fairly busy day for data releases again as we see a raft of low level releases from Europe in the morning, but with the focus of the day on UK unemployment data early morning and US retail sales just after lunch.

With the Euro seemingly the strongest of the 3 major currencies at present and having made continued gains in recent weeks against both GBP and USD the market is prepared for further drops in rates in the coming weeks.

The poor inflation figure for the UK has resulted in further weakness as it pushes back a date for a much anticipated hike, and with the single currency continuing to gains against the Dollar this is only encouraging it to gain further against the pound.

Should you have any upcoming transfers to make, particularly those involving GBP, EUR or USD speak to your Currency Index broker today for some friendly guidance on how to avoid any further drops in rates and  increases in costs, whether it be topping your account up, paying an invoice or  supplier, or securing funds for your dream home abroad.