12 September, 2017
The Pound had recently hit new lows against the Euro and Dollar and was beginning its retracement- fortunately, the markets saw it the same way and on Friday we began to see Sterling exchange rates strengthen across the board. The GBPUSD exchange rate is above 1.31 and the GBPEUR exchange rate is on its way to 1.10.
The question on everyone’s mind at the moment seems to be, “How much will the Pound strengthen?”- and amongst all of the political turmoil going on at the moment, it is an extremely hard question to answer, especially in the long term. In the short term, however, the target currently for GBPUSD is to reach 1.32- so I would definitely recommend looking at this 1.31 area if you are looking to purchase instead of waiting for an extra 0.3% percent to risk. As far as the GBPEUR is concerned, now the ECB has spoken, we have less volatility from Europe and are now solely focusing on economic data to drive the market.
As far as UK economic data is concerned, the main day for the UK will be Tuesday when we will release our latest CPI (Inflation) numbers- for those of you who read this blog regularly, you’ll know that the UK has seen lower inflation for the last 2 months in a row- so, in my opinion, it is the expectation that this month will now be higher- the expectation of the markets is also the same so as long as we see this result, we can expect the Pound to strengthen on Tuesday morning following this news.
Wednesday will also be an important day for the UK as we will release our latest employment and wages figures- which again are all expected stronger- so providing it does come out this way- we could see a strong week for the Pound. It is also worth pointing out that the Eurozone is projected to release very strong industrial production numbers on Wednesday morning- so we may find that the GBPEUR exchange rate remains balanced after these releases instead of sharp moves- unless the data comes out higher or lower than expected.
The next important release for the UK will be the Bank of England’s interest rate decision on Thursday afternoon- although we are not expecting any change in the current interest rate in the UK, the markets will be watching to see how the members vote- more members voting for a hike is hawkish for the Pound- and of course fewer votes is the opposite. I feel that the BoE may keep their votes the same which could cause the Pound to weaken so Thursday could put an end to any gains seen this week on the GBP so this will be important to keep in mind.