By Ashley Finill
This week has seen a mixed bag for sterling on the currency market. After the Budget was announced a couple of weeks ago, the pound surprisingly gained on the Euro but this week the rally has come to halt and some of the gains made have started to reverse, showing the frailties of the pound.
This morning the UK posted GDP figures which showed a contraction in the economy by 0.1% in October. The ONS said that during October, UK’s services sector fell by 0.3%, while construction was down 0.6%. However, production grew by 1.1%. Reports also suggested that rumours and leaks in the run-up to the budget were to blame for dampening demand. The Pound has immediately reacted to the bad news and has seen a drop off from the Euro in the early morning trading. Economists polled by the Reuters news agency had predicted that October GDP would grow by 0.1%, this gives further pressure on the Bank of England for interest rate cuts in the UK next week.
Interest Rates Decisions
This week, the Fed cut the interest rate in the US for the 3rd consecutive time. This saw both Sterling and the Euro make gains on the Greenback. The Dollar has been on the back foot against the majors over the last few months due to their bullish cutting of interest rates in the country. Fed chair Powell has hinted that a pause of cuts is likely in their meeting in January. Next week the Bank of England hold their next meeting on Thursday and at 12pm will announce if they have opted to cut rates in the UK. A cut is expected, should that happen then we can expect Sterling to react and a drop against both the Euro and Dollar is certainly possible. BoE Governor Andrew Bailey will hold a press conference at 12.30pm to give insight on their decision and what their plans are on further interest rate decisions into the new year, we can also expect volatility throughout the press conference. Should you have a requirement for Euros, it may be prudent to speak to your currency consultant at A Place in the Sun Currency today to discuss your options.