Pound sneaks back up

27 October, 2016

Robin Haynes

Yesterday was a quiet day for data in the UK and Europe, and sterling took advantage to post some modest gains against the Euro (+0.4c) and US Dollar (+0.6c) through the day’s trading. For once, Brexit headlines gave way to Heathrow and PPI, although clearly the uncertainty around the UK’s plans to leave the EU continue to put a firm lid on any gains for the ailing Pound.

But will exchange rates fall again?
Today we are back to economic reality, with the preliminary estimate of economic growth (GDP) for July to September, published at 9.30am. An expected figure of 0.3% quarterly growth will be watched with interest in the UK and EU, as a major indicator of the British economy’s performance, post-June referendum. Of course, now we know that Article 50 will be triggered in Q1 2017, the biggest test for the economy is yet to come, but any indication that we might return to recession in the coming months with a figure closer to zero growth, would likely be a major problem for the Pound – even given its recent dire performance in currency markets.

Looking further ahead, next week sees the Bank of England announces its latest monetary policy on Thursday, and if interest rates are cut further or QE extended, we would be likely to see sterling suffering. And next month we have the new Chancellor, Phillip Hammond, giving his first Autumn Budget Statement on November 23rd, which could contain some Brexit-mitigating policies designed to protect growth, at the expense of sterling’s value.
Elsewhere yesterday, the Australian dollar weakened after inflation figures came out higher than expected, while today’s only major economic data release is US Durable Goods orders, at 1.30pm.

So if you don’t want to turn the clock back on your own overseas purchase, consider a small improvement in exchange rates as a welcome saving, and talk to us at Currency Index about your options including a fixed and guaranteed rate for your upcoming foreign currency payments.