No help for Pound after interest rate rise

6 November, 2017

Robin Haynes

interest rate riseLast week’s widely expected interest rate rise in the UK failed to do what many analysts were expecting, with the Pound actually falling back against many currencies despite the Bank of England’s interest rate rise on Thursday. Normally for the Pound after interest rate rise, we would expect to see an improvement in exchange rates, but on this occasion the markets had already anticipated the rate rise, meaning the announcement was fully priced in by Thursday lunch time’s announcement. In fact, as Governor Mark Carney explained that any future rate rises were further away than previously anticipated, we saw the Pound fall back and although losses were reduced by some recovery on Friday, sterling ended the week lower than it had started against both the Euro and US Dollar.

Even Friday’s very disappointing non-farm payroll figures in the USA, failed to reduce the price of the US Dollar, which is experiencing a particularly unpredictable trading pattern currently. The only major UK data on Friday was services sector growth, which came in slightly better than expected, and may have been the reason for the Pound’s slight recovery through Friday trading.

Currency news this week

This week’s currency news calendar sees little action for the UK until Friday’s trade balance and industrial figures, with the exception of the normally-reliable NIESR GDP estimate tomorrow. We do have interest rate decisions down under which will be of interest to any readers looking to send money to Australia or New Zealand but otherwise a patchy calendar with not a huge amount likely to cause improvements in exchange rates.

0700 German factory orders
0815 Swiss consumer inflation
0900 Eurozone services growth
1000 Eurozone producer inflation
1300 Speech – Janet Yellen

0330 Australian interest rate decision
0830 UK house prices (Halifax)
1000 Eurozone retail sales
1500 UK GDP estimate

2000 New Zealand interest rate decision

0700 German trade balance
0900 Eurozone economic bulletin
1000 Eurozone growth forecasts

0030 Australian interest rate minutes
0930 UK trade balance
0930 UK industrial & manufacturing production

Brexit Update – what next for Pound after interest rate rise?

interest rate riseThe President of the CBI is set to use a speech today to demand more progress on Brexit trade talks, with 60% of UK businesses apparently ready to trigger contingency plans if there is no clarity on a possible trade deal with the EU by March. With Bank of England Governor Mark Carney telling us that, without a trade deal in place before the UK’s 2019 exit from the EU, economic growth would be sure to suffer, the lack of any material plan can only weigh on the Pound in the medium term. With political instability (who will be the next MP to resign?) and more revelations of offshore tax avoidance surfacing in this morning’s papers, plus no further boosts for the Pound after interest rate rise s for the time being, exchange rates could be in for a dark and gloomy winter. Don’t forget that you can use a forward contract from Currency Index, to fix an exchange rate now for when the clocks go forward again, or indeed up to 2 years ahead.