Sterling Exchange Rates Continue to Drop

Thursday’s Trading

Yesterday’s trading session was absent of any major data releases for any of the majors, and therefore rates continued to trade off the recent days sentiment. The day opened with Sterling exchange rates dropping across the board after a succession of weaker growth figures during the last week.

UK GDP was revised down to 1.5% last Friday, followed this week by a drop in manufacturing growth, and even a contraction in the UK construction sector. A lack of progression with Brexit talks is also heavily weighing on the pound and this pressure is unlikely to ease anytime soon.

Sterling exchange rates vs US Dollar

Cable took the biggest hit yesterday with the pound weakening and the US Dollar continuing is recent recovery. This recovery was somewhat boosted by the best non-manufacturing Ism figure (59.8) that has been seen in 12 years, increasing the possibility of a rate hike in December.

GBP/USD rates have now dropped over 5 cents in just 2 weeks and rates are fully expected to remain within the market range of 1.26-1.34 between now and the end of the year. With the US likely to beat the UK to the next rate hike, a move lower remains the highest probability.

Sterling exchange rates vs Euro

The pound has now dropped around 2% in the last week against the single currency as traders begin to cash in on the 7 cent rise last month. Given Sterling’s rise has been very much speculative on BoE action, the recent gains could very easily be eroded in the coming months if data continues to disappoint, and especially if the BoE does not take any action on November 2^nd.

Policy change in November remains below 40% chance, especially with growth slowing more than expected. Inflation figures on Tuesday 17^th October will be the most important release to note, with a variance either side of the current 2.9% figures likely to heavily affect sterling exchange rates.

The Day Ahead

Today is all about the US Dollar again with last month Non-farm Payroll figures due at 1:30 pm, along with average earnings and the headline Unemployment rate. These figures will have further weight towards a potential rate change in December so expect the markets to favour the US Dollar again if we see a strong figure.  If you are looking at fixing a rate to avoid the negative market movements, talk to a currency broker today.