Pound starts to fall back – and exchange rates likely to fluctuate this week

4 August, 2014

Robin Haynes

Friday was not a good day for the Pound. As many analysts had been warning, it might only take a piece of negative data to topple a resurgent sterling, and with the US Dollar starting to gain strength in the markets, we saw worse-than-expected UK manufacturing figures for July act as the catalyst for one of the most negative days for exchange rates for some time.

By mid-afternoon the Pound had fallen nearly a cent against both the Euro and US Dollar.

Indeed rates for buying US Dollars are now over 2% worse than just 2 months ago, having fallen for 10 trading days in a row as the Greenback gains momentum on the back of the turnaround in the US economy.

This week, we have interest rate announcements from the European Central Bank, Bank of Japan, Bank of England, and Reserve Bank of Australia. Interest rate rises in any of these economies will usually make their currency more valuable, so those of you looking to send money abroad using GBP in the coming months will be hoping for the Bank of England to blink first. That said, an interest rate rise later this year is probably priced into exchange rates already, with the UK very likely to be the first economy to raise rates on current performance. Unfortunately we will not get to see the minutes of this week’s Bank of England vote for another 2 weeks, and it may be too early for any of the 9-strong Monetary Policy Committee to start voting for hikes just yet in any case.

This week also sees unemployment figures in Australia & Canada, the UK trade balance, and Eurozone retail sales, so we could be in for a volatile week after a quieter time on the markets recently. For those of you buying or selling Euros, the ECB’s own interest rate decision on Thursday is followed by a detailed speech by its President, Mario Draghi, which usually causes movement for the Euro – one way or the other.

Don’t forget if you are worried about rates falling back from recent highs, you can fix your exchange rate up to 2 years ahead with Currency Index – ideal if you are buying a property abroad or importing goods for your business. Call us to chat through all your options.