By Ashley Finill
After a volatile July, Sterling has entered August on the back foot against both the Euro and US dollar. Due to poor economic data driven by concerns over slowing UK growth, and expectations of future Bank of England rate cuts, the pound has very little support and as a result, continues to lose ground against the major currencies. On Friday, the US posted non-farm payrolls which undershoot expectations as the figure rose to 73k in July, which was well below forecasts. The announcement sparked a sell-off for the dollar with an expectation now that the Fed will cut interest rates at their next meeting in September. After the announcement, Sterling gained on the greenback by over a cent, but it wasn’t all good news for the pound, as the Euro rallied against both the Dollar and the pound showing that it has a more safe-haven status during slow economic performance from both the US and UK.
BoE Interest Rate Decision on Thursday
Attention for Sterling this week turns to the Bank of England as they meet on Thursday this week for the interest rate decision in the UK. It is widely expected that a vote for a cut of 25 basis points is to be announced from 4.25% to 4%. Historically, Sterling has been vulnerable to rate cuts with losses across the board when such an announcement has been made. Should you have a requirement imminent or within the next few weeks, it may be a good idea to speak to your currency consultant ahead of the decision to mitigate your risk against the unpredictable market movements this week. We have various contract options tailored to suit your needs, like a forward contract option for example, this allows you to lock in your currency at today’s rate with just a 10% deposit. Should the market move against you, you will have peace of mind that you have secured a rate and are not exposed to future market movements in this unpredictable market we are currently seeing, with Sterling struggling in recent months. Speak to your currency consultant at A Place in the Sun Currency to discuss your options.
Data this week
As we head into August there will be a raft of new data releases across the world throughout the month which will continue to affect the FX markets. We have a busy week ahead, starting today. In the afternoon, the US post Factory orders at 2pm, in the late evening in Australia PMI data will be posted at 11pm, whilst the UK also post BRC like-for-like Retail Sales at the same time. Onto Tuesday, The EU post HCOB Composite PMI and PPI data. In the afternoon, the US post ISM Services PMI at 2pm. On Wednesday, the EU post Retail Sales at 9am, into the afternoon there are a few FED speeches from members Collins, Cook and Daly. Onto a busy Thursday, Overnight, Aus post exports, imports & Trade Balance figures. At 6am, Germany post Industrial production and Trade Balance, at 8am the ECB post their Economic Bulletin. Thursday afternoon at 12pm, the BoE announce their interest rate decision, expect the markets to be highly volatile during and post announcement. At 12.30pm the US post, initial jobless claims, and Unit Labour costs. Onto Friday and quiet end to the week with little data to note, with just Canada posting the unemployment rate in the country at 12.30pm.