Poor end of the week for Sterling

15 May, 2017

Grace Rae

On Friday we saw GBP-EUR rates continue to coast along in a downward movement as the trading day progressed. The currency pair has been trading in a tight range these last few weeks and currently experiencing the lower end of the spectrum. This is likely down to the comments made by the Bank of England following the vote by the MPC members which came in as expected to keep interest rates unchanged during this month’s monetary policy meeting.

When results come in as anticipated the rates tend to be fairly un-reactive, however during the press conference that followed the vote, Mark Carney made comments suggesting that interest rates have potential to rise in the next three years on the assumption that successful Brexit negotiations take place and “the adjustment to the UK’S new relationship with the EU is smooth”.

With the upcoming General election and both the Conservatives and Labour heavily campaigning for the public’s vote in June, it would appear that a vote for Theresa May would be the more suited candidate for a “smooth” Brexit. And as the election progresses, and opinion polls dues to be released, maybe these can at least provide a small insight into which way the voters will go. That being said, polls in the past have not always been true to the final result, and can’t always be relied on.

From an investors point of view a vote for Teresa May seems the more Pound supportive option over Jeremy Corbyn as she is viewed to be less threatening to British politics, so should she win we could see a small improvement in rates, however the more likely outcome would be that a Conservative victory could already be priced into the rates in the run up to the final vote, and if we see a Labour victory we could the see the opposite happen and the Pound could struggle over the uncertainly that follows with a new Prime Minister.

The Week Ahead:

Various Low key EU data in the morning
15:00 USD Housing Market Index

09:30 GBP Retail, Production Price Index, PPI Core output and Consumer Price Index
10:00 EUR Trade Balance, GDP and Economic Sentiment Survey
13:30 USD Housing Starts, Building Permits
14:15 USD Industrial Production

08:00 EUR ECB Non-Monetary Policy Meeting
09:30 GBP Claimant Count, Average Earnings and Unemployment Rate
10:00 EUR Consumer Price Index (YoY)
11:00 EUR Consumer Price Index (MoM)

02:30 AUD Employment Change, Unemployment Rate
09:30 GBP Retail Sales
13:30 USD Jobless Claims May and Philadelphia Fed Manufacturing Survey

14:30 CAD Consumer Price Index
15:00 EUR Consumer Confidence

With the general election now only 24 days away and lots going on in the interim, don’t get caught out by the rates and get in touch with your broker here at Currency Index to discuss the various options we provide in order to get the most from your currency.