Yesterday saw the Pound lose ground as the effects of Wednesday’s Bank of England minutes filtered through foreign exchange markets. Mark Carney’s band of merry men (and women) seem reluctant to give any support to interest rate rise sentiment, with a ‘will they, won’t they?’ see-saw giving us a stronger Pound one minute and a weaker one the next. (Interest rate rise speculation has been one of the main factors giving the Pound its strength in recent weeks.) This time, wage growth is the monetary policy committee’s concern, with unemployment and inflation having been their other recent reasons to remain cautious on interest rate hikes.
Yesterday also saw UK retail sales come in below expectations, which didn’t help sterling’s cause. While retail sales showed their fastest quarterly pace of growth for 10 years, June alone was disappointing, with a small 0.1% growth from May. Along with better than expected Eurozone and US data, it is perhaps no surprise that we saw GBP-EUR and GBP-USD lose the best part of a cent.
Fridays are normally quiet in terms of data releases, but this morning we have UK GDP at 9.30am for the second calendar quarter, and as always a reading better than the expected 3.1% annual growth figure would help exchange rates back up, and vice versa if growth has been disappointing.
Next week we move towards the end of the month and there is nothing major due out in the UK before the start of August and the traditional holiday period. Therefore, the Pound may struggle to recover, and those of you looking to send money abroad may like to look at securing your exchange rate now.
One piece of good news is that today’s GDP figure should reveal that the UK economy is now bigger that it was before the financial crisis struck 6 years ago. It’s a landmark for the economy, although Mark Carney warned that “none of us should forget the extraordinary forces that are still weighing on this economy.”