UK inflation takes centre stage

16 February, 2016

Rob Bastin

This week’s trading began on a quieter note with the USA on a bank holiday yesterday. There was also no key data to affect exchange rates so a continuation of Friday’s movements was largely seen across the board ahead of a busy week of eco-stats. Euro-zone Trade Balance figures were announced in the morning and the figure of €21B fell short of the €22.4B forecast and likely aided a slight drop in the Euro’s value against the pound and US Dollar. This meant that GBP/EUR rates have now recovered over 3 cents since last weeks’ low, providing another opportunity to buy or fix your Euro rate at better levels, especially when you consider that we have not seen a bigger recovery than this in the move down from 1.42 back in December. The trend remains against the pound and the rest of the week has many hurdles to get over with high risks of the downward trend resuming.

This morning at 9:30am the latest UK inflation figures are to be announced, with a sharp contraction of 0.7% expected in the reported month of December, although the annual figure is forecast to be up at 0.3%. Low inflation is one of the factors causing Sterling to be so weak at present as it is delaying any interest rate hike in the UK. Unless the figures can far surpass expectations, then it is very likely that the pound will continue to come under pressure from its currently higher market position. With the US markets back in swing today as well, don’t be surprised if we see some big movements in the next 24hrs with UK unemployment and average earnings also set to be announced tomorrow morning, another area where progress is struggling.

For anyone still needing to make a transfer from the UK overseas, remember that a negative trend is not your friend, and having time on your side can be a costly luxury. Make sure you consider a Forward Contract where you can fix your rate for up to 1 year with just a 10% deposit, removing the risk of further losses on your overseas transfer.