Thursday, 19 September 2013

Pound falls after poor UK Retail Sales.

Thursday 19th September 2013
Good afternoon. Since my last post, we’ve seen quite a bit of volatility in the currency markets. I mentioned a few days ago that the markets had been flat, and that I predicted the Bank of England (BOE) minutes and UK Retail Sales would probably cause some movements in the value of the Pound/Euro rate, and indeed they did. We have also seen some news from the US Federal Reserve that has caused a big change in GBP/USD rates.

So let’s take a look at what’s been happening…

Bank of England minutes push the Pound higher

Yesterday we saw that the Bank of England has upgraded its growth forecast for the UK economy when they released the latest minutes from their Monetary Policy Committee. You can read the minutes here if you so wish!

The minutes show that third-quarter growth is expected to be 0.7%, up from 0.5%. The minutes also show that the MPC voted unanimously to keep interest rates and quantitative easing (QE) on hold this month.

It had a big impact on the value of the Pound, which rose against other currencies. Climbing to €1.1960 against the Euro – around the best it’s been all year. The gains were not to last however, as today’s UK Retail Sales news pulled the Pound down again. More on that in a moment.

US FED weakens the US Dollar significantly

Overnight, the US central bank unexpectedly said it would not begin scaling back its massive economic stimulus programme until the US economy had improved further. The bank also cut its growth forecast. So pretty much the exact opposite of what the Bank of England did.

The result was the opposite also – the Dollar weakened significantly, pushing the GBP/USD rates to as high as $1.6150 – the highest it’s been all year.

As with the Pound/Euro rate, the all year highs were short lived due to some poor UK economic news…

UK Retail Sales disappoint

This morning at 09:30am the latest UK retail sales numbers were released. Most analysts thought they would show a rise of 0.4%. Not to be – the actual figure showed a drop of 0.9% and this was a big surprise.
The currency markets don’t like surprises, and as Retail Sales are seen as an indicator of consumer confidence, and therefore the economy as a whole, the Pound lost quite a bit of value.


As you can see from today’s graph, the Pound fell as soon as the number was released, pulling GBP/EUR rates to €1.1860 and GBP/USD rates to $1.6090.

Getting the best exchange rates

I mentioned in my last post that rates seemed to have levelled off, and indeed it looks like recent highs may well have been a peak. The current buying levels are still very good however.

So if you need to convert Pounds to another currency, or convert a foreign currency back to Sterling, you should get in touch with me to find out the rates that I can offer.


I provide commercial rates of exchange to both private and corporate clients that are much better than banks can offer. Get in touch with me today to find out more.
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