Poor UK retail sales but GBP holds following no change to ECB rate.
22 July, 2016
Yesterday morning’s main data release was that of UK retail sales figures, which all came in under market expectations. As a result the pound saw a dip in rates in the mornings trading, losing ground across the board. This dip was however relatively short-lived as traders waited for the main release of the day which came in the afternoon with the ECB interest rate decision and monetary policy statement release. In what was a much more explicit tone than normal Draghi clearly spelled out that the ECB expected interest rates to remain at the current record lows, or perhaps even lower for a period some time. Whilst some had expected another cut to the rate or perhaps an extension of the Q.E programme (particularly in light of the recent Brexit vote and currently low GBP>EUR rates) this did not occur.
As a result there was little movement, and the Pound managed to claw back the losses suffered in the mornings session to close the day almost exactly where it opened against the major currencies – USD and EUR.
This stagnation in rates is not hugely surprising given that we have seen so much volatility in recent weeks, and that much of the market still waits for the dust to settle post Brexit. What should be considered though is that whilst rates have remained relatively stable on the past couple of weeks, the BoE are set for an Interest rate cut over the Summer. And as this did not happen last week, it only increase the likelihood of it happening now when they meet next on 4th August and as such the probability GBP rates will suffer further.
To add to the Pounds woes, we will also likely see further losses in the coming months against the Dollar as whilst we are looking to cut rates, the FED still hope to actually raise their interest rates perhaps twice more this year. As such those of you with upcoming requirements for currencies bought with GBP may like to consider this carefully, and speak to your Currency Index broker today on how to avoid any costly movements in exchange rates.
Today is a fairly quiet day in the way of Ecostats with the only major release coming from Canada in the afternoon who release a number of inflation reports. Other than that we have a number of low-key releases from Europe in the morning, so will likely see a fairly flat days trading – perhaps a good opportunity to take before we might see rates take another dip in the coming weeks. As we have seen in recent weeks, much can happen in the extremely uncertain and volatile market we are experiencing, but certainly at present the downside risk is still a significant one. Speak to your Currency Index broker today for some friendly and professional advice on how to get the most out of your currency transfer.
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