Quiet week for Sterling sees further loss

In the aftermath of the aggressive action taken from the Bank of England at the beginning of the month, Sterling had a particularly quiet week with a lack of any key data on the calendar. The pound therefore found itself moving gradually lower by the day, eventually down to the original post Referendum lows as this slippery downward trend continues. GBP/EUR and GBP/USD have now dropped over 4 cents since the Bank of England cut rates and with MPC members talking up further rate cuts this year, as well additional QE, it seems that forecasts of another 5% depreciation before year end are incredibly likely.

Friday’s trading focused on the Euro and the Greenback with 2 key releases. Euro-zone growth came in 1.6% on the year, exactly as expected and this enabled the Euro to continue its strong performance against the pound and US Dollar. In the afternoon trading US Retail Sales posted a very weak figure, with zero growth in the month of July, against expectations of 0.4% growth. This caused a brief spike in cable that barely lasted an hour as traders came in quick to continue pushing sterling rates back down.

In an aggressively dropping market like this, stability or small natural corrections are likely the best we can hope for for anyone who still needs to buy overseas currency. Forward Contracts are proving extremely popular as this can protect you from any further drop in rates with just a 10% deposit. Any short term improvements should be seen as opportunities as there is a significantly high risk of lower exchange rates with the more time that passes.

The week ahead carries added risk for Sterling with new data announcements, particularly inflation figures on Tuesday, and Unemployment figures on Wednesday, and Retail Sales on Thursday. With a busy week ahead, keep in close contact with your account manager in case of any spikes or opportunities from these announcements. Data to keep an eye out for this week is detailed as below:

Tuesday:
2:30am (AUD) – RBA Minutes
9:30am (GBP) – UK Consumer Price Index
1:30pm (USD) – US Consumer Price Index

Wednesday:
9:30am (GBP) – UK Unemployment / Average Earnings
7:00pm (USD) – FOMC Minutes

Thursday:
2:30am (AUD) – Australian Unemployment Rate
9:30am (GBP) – UK Retail Sales
10:-00am (EUR) – Euro-zone Consumer Price Index