Pound Rallies As Month Ends

31 October, 2017

Simon Eastman

Yesterday saw the pound rally as the month draws to a close, helped by speculation over what the Bank of England will do with interest rates when they meet on Thursday. Markets are split over whether we will see an interest rate rise when they meet, the first in over a decade. We see an 85 percent chance of rates going up which has been priced in so far, giving the pound its recent boost. Some speculators feel it may be too early for a raise, thinking it may be prudent for the Bank to see what inflation does next month before making the choice. We will have to wait until Thursday to see what they do. Should they decide to stick at the current rate for now, the pound will almost certainly suffer as a result, so caution should be taken if you have an imminent overseas transfer to make.

Catalan Saga Hurts Single Currency

With the Catalonia leader Carles Puigdemont on the run, with fears over rebellion charges, the single currency euro continues under pressure. Madrid is threatening to bring charges over his actions in calling a referendum for independence without authorisation from the capital. They are looking to bring rebellion, sedition and provocation charges against the leader for his actions which saw the Catalan state’s referendum ruled as void. Puigdemont has fled to Brussels with a number of his government after they were granted asylum there. EUR/USD has fallen 4 cents in recent weeks, with sterling also making noticeable gains.

Mondays Data Releases

Monday brought mortgage supply figures for the UK, posting better than expected numbers. The EU business sentiment and economic climate figures also beat expectations leading to some fairly range-bound trading in the morning session. After lunch the US markets opened, bringing some as expected consumer spending data, while the German inflation posted lower than forecast. This allowed the pound to start its rally, gaining just under a cent against the euro and a cent against the US dollar by close of trade.

Trick or Treat For Sterling

With no UK data out at all to end the month it will be up to the various other releases around the globe to be a trick or treat for sterling. We have various localised EU releases this morning ahead of the EU GDP reading and the unemployment rate, both which have the ability to boost the ailing euro should the figures beat forecasts. This afternoon its the Loonies turn as Canada release their GDP reading, so beware anyone sending money to Canada. There is also an evening speech by Canadian Governor Poloz which could throw up further volatility for the dollar, so it may be worth an early call to the CI team this morning to avoid the potential volatility.

Happy Halloween readers.