Lack of Sterling Movement

14 August, 2019

Rob Bastin

Yesterday’s trading was a very flat day for the pound, having just experienced 14 weeks of declining exchange rates to take GBP/EUR rates to a 10 year low, and GBP/USD to a 34 year low. We have seen small signs in the markets that Sterling may now be ready to settle, and potentially see small corrections in the coming weeks. However with Brexit back on the agenda come September, any immediate recoveries in rates could be very limited and indeed short-lived. In markets like these, our LIMIT orders can be a very useful tool to capture any better rates that may present themselves as they ensure you do not miss your desired rate should it become available even for a brief amount of time, and even if the opportunity is in the middle of the night.

Eco-stats for the UK yesterday saw a mixed bag of results hence the lack of Sterling movement. Average earnings posted strong figures once again, with an 11 year high up to 3.9% compared to a forecasted 3.8%. The unemployment rate in the UK, however, rose from 3.8% to 3.9% in the month of June, a concerning sign just a few days after UK growth in Q2 was confirmed to have contracted by 0.2%. Another negative reading in Q3 will officially see the UK
in a recession. The afternoon session saw inflation figures for the US, which were slightly better than expected at 1.8% compared to a consensus of 1.7%. With inflation edging back towards 2% target, this figure could dampen expectations for another rate cut in September for, the Federal Reserve.

This morning we have more eco-stats out and this time it is the UK’s turn for the latest inflation readings. Currently sat just below target at 1.9%, the BoE is in a very different situation with the Federal Reserve. The US is expected to implement further rates cuts in the next 12 month from its current base rate of 2.25%. The Bank of England, however, are ready to either raise or cut rates in the next 6 months depending on the developments with Brexit, meaning this isolated inflation figure today is likely to have little impact on the pound.