Quiet start to the week for sterling

18 May, 2015

Robin Haynes

Today sees little important news due out in the UK, but inflation (tomorrow) the Bank of England minutes (Wednesday) and public sector borrowing (Friday) are likely to exert influence on the value of the Pound. Inflation figures tomorrow are of particular interest, after the Bank of England warned of possible deflation in the UK economy, which could send the Pound lower when the figures are announced in the morning.

Last week, Bank of England Governor Mark Carney also downgraded the UK’s growth forecast, which sent the Pound lower – particularly against the Euro. Rates for buying and sending Euros abroad fell around 2% across the week.

The underlying story for foreign exchange rates is perhaps the reversal of fortune for the Euro against the US Dollar. The Dollar has been weakening against the Euro for the last month, having hit record highs in March. The retracement has meant that the US Dollar is now cheaper to buy for holders of Pounds, and the Euro conversely more expensive. Regular readers will be familiar with the currency see-saw analogy, which sees the Pound in the middle and affected by swings in the Euro against the Dollar.

Elsewhere this week we have Swiss retail sales, Eurozone, Canadian & US inflation, German GDP, and a speech from ECB President Mario Draghi on the calendar. So while all might be quiet at home, there is plenty in the news which could get exchange rates moving.

George Osborne has also announced that there will be a Budget in July – an unusual move and the first Conservative-only Budget since 1992. Where will the government find to make its necessary cuts, and will there be an impact on the Pound?