Pound falls further on low inflation

Tuesday 14th October 2014
Sterling has fallen by a further cent today against the Euro, with rates dropping down into the €1.25’s. Against the US Dollar, rates have dropped by 1.5 cents bring rates down into to around $1.59. What has caused the Pound to fall? 

It is due to very low UK inflation numbers. Figures this morning showed that UK inflation fell to a 5 year low of 1.2%. The reason this has caused rates to fall is that these new low inflation numbers meant that an interest rate rise in the UK is very unlikely in the short term. I expect the Bank of England will now hold off well into 2015, probably after the general election. 

On the one hand, the UK economy is the fastest growing in the developed world, and this would normally mean a rise in interest rates. Indeed it’s this speculation that has been driving the Pound up in recent months. However these latest figures change all of that, so it looks like the Pounds run has come to an end for the time being. 

In my most recent report I warned that this could well be the case, and that rates were unlikely to go higher. That has proved to be true and rates have now tumbled away, repeating the trend as I suggested would be that case. 

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What else could affect exchange rates this week? 

Tomorrow is a key day for Sterling/Euro rates, as we have the latest Unemployment figures for the UK In addition to this we have 2 speeches by the ECB president Mario Draghi at 8am and 7pm respectively, and his comments could cause a change in the value of the Euro. 

For Sterling/Dollar, watch out for a host of economic data from the states such as Retail Sales, manufacturing, Unemployment and House data. Also on Friday we have a speech by FED chair Janet Yellen. If these figures are impressive as recent US data has been, then we could see the US Dollar strengthen and GBP/USD rates drop even further. 

Are you looking for the best exchange rates? 

If you have a currency transaction to conduct in the coming weeks or months, then get in touch with me to see how I can help. I can provide excellent commercial exchange rates that are usually significantly better than banks and other brokers. I can also explain what is likely to move exchange rates in the coming weeks to help you make an informed decision on when to fix a rate. 

I have worked in financial services for over 15 years, specialising in commercial foreign exchange for the last 10. Why not take advantage of my free consultative service to see if I can save you money on your currency exchange. I look forward to hearing from you. 

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