The Fragile Pound
14 June, 2018
The pound remains fragile due to lack of clarity on Brexit and poor data being released in the economy. We have recently had a fall in manufacturing data which proved to be the biggest drop since October 2012. GDP came in below expectations at 0.2%, and average earnings have fallen to 2.5%.
Brexit talks at present are the Irish border deal. Theresa May and David Davis are having trouble agreeing on a backup plan. To see the Pound make any significant gains, we will need real progress in talks, which at the moment doesn’t seem likely to happen anytime soon.
GBP/EUR – The ECB meeting is today at 11:45 am and if there is a cut to the QE program we could potentially see a significant Euro strength. The current GBPEUR rate is a very attractive rate to trade at as its only 1% below the best rate we’ve had in 12 months. Potentially there is room for further gains but evaluate whether it is worth the risk before taking the gamble.
GBP/USD – The Dollar is moving from strength to strength. The returns on Treasury bonds are now at some of the best levels in years. The Fed raised interest rates by 0.25% at the end of Wednesday after their policy meeting. The Federal Open Market Committee cited some issues in making its decision – job gains, declining unemployment and stronger inflation at 2 percent.
Earlier this year, the Fed indicated it would make three rate hikes this year, but raised that projection to four Wednesday. GBPUSD rate is doing better than it has been the last couple weeks and with Retail Sales data being released at 12:30, the rate could either strengthen or weaken depending on the outcome. If there is a requirement to buy USD, then this may be the time.
Between May and August last year, the rates fell over 10%, and any clients of ours who had been in regular contact with us were able to significantly reduce the effect of that drop, simply because they were aware of what was happening and why. If you’re buying a property overseas, then that 10% movement could mean thousands of pounds hence why I highly recommend that you get in touch with our experienced and friendly Currency Index team to discuss your requirements. We’re very confident that we can demonstrate a significant saving as well as provide key information that will benefit you leading up to your purchase.
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