By Ashley Finill
Towards the end of last week, Sterling had been the best performing currency against the majors, as the pound gained back some ground on the euro and hit fresh two-and-a-half year high against the Dollar, which brought with it an influx of dollar buying. The weakened US economy continued to hurt the Greenback but as we start the month of September there has been somewhat of a fightback from the dollar, clawing back nearly a cent against Sterling which could be a hint that the tables could start to turn for GBP-USD. The same can’t be said for EUR-USD as the single currency continued its steady gain on the dollar over the past couple of months. Those of you who may have a dollar requirement who didn’t take the jump last week as you may have been holding out for a bit more, may be savvy to rethink and take advantage at what still is a great time to buy the US Dollar. Sterling could also have hit the ceiling of resistance with the Euro as gains made last week have seemed to stall this week, with the Euro making slight gains of just under half a cent on Sterling from where it left off this time last week. So, could we now be seeing a shift in market sentiment for investors of the Pound as the BoE interest rate decision is just under two weeks away?
BoE Decision Looming
Interest rates are still a key game player in currency market movements as we await the bank of England next interest rate decision on Thursday the 19th of September. The monetary policy committee will vote on whether they are to either cut rates, or hold at 5.00%. Last time out the BoE decided to cut by 0.25% basis points, and as a result saw the pump miserably slump against the Euro by over two-and-a-half cents across a five-day period. With the rate decision coming closer there are more reports suggesting what could happen at the next meeting, recent economic analysis suggest that the Bank of England could go with “mini rate cuts”. That’s according to The British Chamber of Commerce who said that BoE could cut at 10 basis points increments in the future with the first coming before the end of this year, The BCC said “The Bank is expected to adopt a more cautious approach and make a series of 0.1pp cuts, bringing the interest rate to 4.3% by the end of 2025, and falling to 3.8% by the end of 2026,”. With that being said, we could start to see more weakness for the Pound across the next few months. As we know, uncertainty does not bode well with Sterling and more importantly neither do rate cuts, as seen at the last BoE rate cut decision. It may be prudent to get in contact with your currency consultant to discuss your options to minimise your risk in an uncertain market, we have contract options tailored to suit your currency needs and giving you peace of mind and certainty in these unpredictable times, speak to your currency consultant for more information and friendly, professional guidance.
Data Today
As we come to the end of the first working week of September, there are still big data releases to take note of which are high likely to affect the currency market. Already, Industrial Production and Trade Balance figures have been posted in Germany all negative for the country, this has given sterling a slight nudge up in the early morning trading. At 9am in the EU, Employment Change and GDP will be release at 9am which will give an insight to how the economy in the EU is fairing, the figure is expected to remain at last months figure of 0.3%, should we see figures either side of that we can expect further volatility in early morning trading. Across the Atlantic in the afternoon, both the US and Canada post Unemployment figures, Non-Farm pay rolls in the US is usually a key data release so we can expect some volatility as we head into afternoon trading, the figures are expected at 12.30pm UK time.