Pound exchange rates start week on a high

Last week saw the Pound take a further leap forward following a speech from the governor of the Bank of England; Mark Carney, during which he stated that interest rates in the UK are likely to start rising sooner than previously expected. The UK’s economic recovery is well and truly on track, with many of the key indicators coming in increasingly positively – a further example of which was unemployment, which was down even more than expected last week. This gives the Bank of England the leeway to start raising interest rates, and as our regular readers will know a higher yielding currency is more attractive to investors, which brings more investment and therefore more strength, which is why the Pound is currently hitting multi-year highs across the board.

The week ahead is a busy one, with plenty of data due out across all the major economic zones. It is the week of the month where we learn most countries inflation numbers, starting in Europe today and the UK and US tomorrow. Inflation is one of the key figures when considering interest rate changes, so expect this week’s numbers to give further indications of the closeness of any changes from the various central banks. Wednesday’s Bank of England minutes might give further ideas of their intentions, but Governor Carney was pretty clear last week, so no particular surprises are expected there.

The US Federal Reserve announces its policy statement for the month on Wednesday which will be critical for the Dollar’s strength. The Dollar has been able to capitalise on a weak Euro recently, but is very vulnerable to its own economy’s faltering recovery and while the FED would love to have good news and possible interest rate rises of their own to discuss, no change is expected this week – all eyes will however be on Chair Janet Yellen’s speech – will she give any indications on what she expects to be coming up with regard to interest rates or tapering of their stimulus packages?

Monday

• European CPI Inflation
• US Industrial Production

Tuesday

• UK CPI Inflation
• UK RPI Inflation
• European ZEW Economic Sentiment Survey
• US CPI Inflation

Wednesday

• UK BoE Minutes
• US FED Interest Rate Decision + Policy Statement

Thursday

• UK Retail Sales
• US Jobless Claims

Friday

• European Current Account
• GBP Public Sector Net Borrowing

The Pound is obviously doing very well at the moment against most currencies, so you could be forgiven for thinking that your upcoming currency purchase is in the bag and a great rate is guaranteed. Where the currency markets are concerned complacency can be incredibly costly – make sure you stay in close contact with your Currency Index account manager to be kept informed of what is happening, and maybe consider booking your currency now while rates are high – further gains will be very hard to achieve whereas a correction back down could easily be realised with even the smallest piece of negative UK data or even just a slight change in sentiment.