Wednesday, 21 September 2016

Sterling stable ahead of FED decision

The Pound has stabilised a little today helped by slightly better Public borrowing data. It hasn't helped a great deal however, and Sterling currently sits around the mid €1.16's vs the Euro and $1.30 vs the US Dollar. (view live graphs).

US FED Interest Rate Decision


Tonight at 6pm the USA will announce its rate decision, along with a policy statement and economic prediction. There has been rumours that the US will be raising interest rates again this year, but I don't think they will do it today. If however they hint at a cut perhaps in November, the US Dollar should gain strength pushing GBP/USD rates lower.

Although this event is over in the states, it could still move GBP/EUR rates. If investors expect higher rates over in the states, it makes the US Do


llar more attractive. These investors will then move funds to the Dollar in order to get a better return. If these investors are currently holding Euros, we will see the Euro weaken and the Dollar strengthen, which might give Pound/Euro rates a little lift, but don't expect too much.

UK Economy after 'Brexit'


The Office of National Statistics (ONS) said today that the referendum has had little to no impact on the economy, so far. Indeed that's why the Pound hasn't fallen further in recent months as things like exports, manufacturing and production all performing well.

However they have also warned that we haven't seen figures from the Services sector for the post Brexit Period yet, and these are due next week. I think these will be very important, as this sector accounts for more than 75% of the economy. The July numbers are out next Friday.

It will be a key indicator of how the economy is faring, and GDP figures are released the same day. It think it's going to be a very important day and likely to drive direction for Sterling exchange rates. If the numbers are poor, the Pound is likely to fall. It's going to get more interesting in the coming months as the markets digest what all of this means, so expect the currency markets to remain extremely volatile and subject to sharp price swings.

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