Sterling on the wrong side of current trends

2 September, 2015

Tom Arnold

The week began later than usual in the UK yesterday following the bank holiday on Monday and Sterling seemed unable to shake off its long weekend, dropping off against both the Euro and the Dollar across the day’s trading. The main driver was weaker than anticipated manufacturing PMI in the UK, with ironically the main blame for this being laid at the feet of a too strong Pound – with manufacturers struggling to export their goods when the Pound is so expensive. As a result rates are now the lowest they have been since May for the Euro, and June for the Dollar.

We have a very busy few days this week, albeit most of the big action – ECB monthly policy statement and US non-farm payrolls – is due in the next couple of days, leaving today relatively quiet.

We have already seen Australian GDP come out overnight – the figure was lower than anticipated, which caused an immediate and sharp drop off in the Aussie Dollar, but as analysts started to take stock and realised at least it wasn’t a negative number, which some had forecast, the Aussie managed to take back its losses and in fact a small amount of additional strength. For those of you looking to send money to Australia, rates are phenomenal at present, so don’t let this put you off.

Still to come we have UK construction PMI figures, European PPI, and then the first clue towards the US non-farm number, in the form of the US ADP employment change. UK PMI is a worry given the poor showing yesterday, although more of a concern is tomorrow’s services PMI with the strong Pound expected to show more impact there. European PPI is expected to remain slightly negative, so a potential opportunity for any Euro buyers if this comes to pass or if we see a worse result, and US employment is expected to post a healthy increase in the number of jobs, so likely a further boost for the Dollar.

So the Pound is on the back foot and trends are certainly now firmly against it, which is not such good news for those with Sterling in hand looking to transfer their funds overseas. But the silver lining could be a boost for the UK economy if a weaker Pound will help increase the volume of exports. There could still be good Euro buying opportunities as anticipated Euro data is still under pressure and Mario Draghi gives the ECB’s monthly policy statement on Thursday, so make sure you stay in close contact with your CI account manager to be kept informed of what is happening with rates.

On the Dollar side things really aren’t looking good with some analysts predicting a strong Dollar for some time to come, boosted even further by imminent interest rate hikes in the US, so if you have a Dollar requirement coming up then biting the bullet might be your best option – remember you can secure your exchange rate now before things get any worse, even if you do not need your currency for some time to come.