Pound exchange rates drift a little lower

8 October, 2014

Tom Arnold

The Pound is not having a very good few days as a result of a couple of releases failing to deliver the hoped for support and this week an almost complete absence of any important data from the UK at all. As a result investors are looking elsewhere for their profits and therefore Sterling is slipping across the board.

This is likely just the ebb and flow of the markets rather than a serious shift in sentiment, as the UK economy is still performing well, with the IMF reporting yesterday that the UK economy was likely to be the best performer of the G7 nations in the year ahead, raising its growth estimate for the UK to 3.2%.

In Europe the picture is still very uncertain with various figures yesterday showing that the German economy – the largest and normally the crutch for the whole block – is struggling and failing to keep pace with the UK and US. Worrying times for Europe… If Germany continues to struggle, who will support the weaker nations?

Tomorrow sees the Bank of England release their monthly policy announcement, but with no change expected, it will be more important to view the minutes from their policy meeting in a couple of weeks time. The all important vote for changes to the interest rate position is what the market wants to see – when will the MPC start raising rates? Most expectations are for the Spring of 2015 – so the Pound is possibly due a few months of limbo until then, but the vote is already moving towards a raise, and surprises can happen…

In the US we get to see the Fed’s minutes from their last policy meeting today, and with a similar situation there – “when will interest rates start to rise?” – it is coming down to a bit of a race between central banks. The Dollar has been doing very well for some time now, with major gains made pretty much everywhere, so the markets will be watching closely to see what the FOMC discussed and how close they came to raising this month.

Despite the slipping Pound, rates are still close to 6 year highs for buying the Euro if you are sending money to Italy, France or Spain for example, and still high against many other currencies. The rate for buying Dollars or the pegged currencies such as the UAE Dirham, is not so good though, but with a dominant Dollar and the FED maybe winning the interest rate race, it might still be the best for some time to come, possibly until the BoE catch up in the Spring…

Whatever your requirement, make sure you stay in close contact with your CI account manager, to be kept informed of exactly what is happening and how it is likely to affect your upcoming currency purchase.