UK Growth Takes Centre Stage

Tuesday’s market was another very flat one for the pound as this last week of the month quietens down on the data front, and the volatility levels drop off significantly. Sterling traded within small ranges against most major currencies with the only currency seeing any real movements yesterday being the US Dollar. The greenback fell against the pound and the Euro in the afternoon session before recovering its losses later in the day. This evening we await the next Interest Decision from the FED at 7 pm for those with an eye on the USD, although no changes are expected this month.

Sterling markets now await the final data release for July, and the last hope of any improvement in exchange rates until the lottery of the new month’s data that will begin as of next Tuesday. Unfortunately growth is one of many areas where the UK is struggling and subsequently effecting the Pounds value. All PMI figures missed expectations earlier this month, and this morning’s GDP figure will be the first reading for Q2 with analysts currently predicting a drop from 2% annual growth to just 1.7%. On the face of things, therefore, there is little optimism for a positive reaction unless results surprise to the upside. Even if this is the case, any gains currently move against the trend and so would likely be limited and short lived, as seen in recent weeks in GBP/EUR in particular.

The weakness in the pound and the strength in the Euro is not expected to change anytime soon, and could very easily remain this way into next year with the current market conditions. Therefore anyone still holding out for improvements in rates should be considering their shorter term options should the rates spike at all and any gains should be viewed as a buying opportunity rather than an indication that further gains are to come. To discuss your options contact your broker today for some friendly guidance.