Tuesday 23rd September 2014
As I write today’s post Ed Miliband is giving a party conference speech. I’m choosing this time to write my report as I don’t think his words will have any effect on exchange rates whatsoever, and the currency markets will also be taking little interest in his comments. It is likely however that with the Scottish referendum now out of the way, political uncertainty ahead of next year’s General Election will start to affect the Pound. In today's post I'll give my views on what could move exchange rates for the rest of the year.
The currency markets don’t like uncertainty, and I think that is keeping the Pound in check from going any higher. Following last week’s spike in the Pound, exchange rates now seem settled at around €1.27 vs the Euro and $1.6350 against the US Dollar.
One example of the uncertainty relating to the UK economy, is possible constitutional changes in the United Kingdom following the Scottish referendum. This could affect investment into the UK and so weaken the Pound off slightly. This combined with the upcoming election is likely to keep the Pound from gaining significantly.
What could affect exchange rates this week?
The only thing I can see this week that could affect the Pound is a speech by the Bank of England (BoE) governor Mark Carney on Thursday. He hasn’t exactly been consistent in his comments on when interest rates will go up in the UK, so the markets will be watching for any comments he may make. Any hint of a rate rise then the Pound could strengthen, if he is dovish however and hints rates are set to remain on hold for some time, we could well see Sterling exchange rates drop away.
All in all, I think those that need to convert Pounds to another currency should consider taking the rate while it’s close to a multi-year high. Even if you don’t need your currency for some time, you can fix today’s rates for up to 2 years by lodging 10% of the total you need to convert.
What if I'm converting Euros back to Pounds?
One thing that could affect things if you are converting Euros to Pounds however, is the chance of further stimulus by Europe. If the European Central Bank decide on further drastic measures to try and boost the economy, the Euro could weaken pushing Pound/Euro rates up.
Below I will list the other things I think could change exchange rates this week. Remember that if you need to convert currency, perhaps for a property abroad for example, you can get in touch with me for a quote by clicking here. I can source excellent exchange rates very close to the ‘mid-market’ level and you could save thousands of Pounds by getting a slightly better rate.
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This week’s remaining economic data that could affect exchange rates
Wednesday 24th September – Quite today in terms of economic data releases. We have some Business Climate and sentiment measures from Germany that could affect Pound/Euro. In the states we have information on mortgage approvals and home sales that could affect Pound/US Dollar.
Thursday 25th September – The only real UK data of note today is a speech by Bank of England (BoE) governor Mark Carney. He hasn’t exactly been consistent in his comments on when interest rates will go up in the UK, so the markets will be watching for any comments he may make. Any hint of a rate rise then the Pound could strengthen, if he is dovish however and hints rates are set to remain on hold for some time, we could well see Sterling exchange rates drop away.
Friday 25th September – Another quiet day with the only thing likely to move Pound/Euro rates being a consumer confidence survey from Germany. All other data is from the USA – GDP figures, consumption and expenditure, and a consumer sentiment index. All of this could affect GBP/USD rates.
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