The Pound had been quite stable at around €1.12 vs the Euro, but today dropped a cent into the mid €1.11’s. It’s due to the BoE Governor Mark Carney being grilled by the House of Lords today, and speculation that he would be hinting at further monetary stimulus.
Mark Carney; impartial?
He is still speaking as I write this post, but so far he’s been more dovish than many had expected, helping the Pound recover some of it’s losses. Instead he’s been defending the impartiality of the BoE in the face of criticism from government over their QE programme and interest rate cuts. Some would argue they acted too early in cutting interest rates earlier this year, and have not done enough to support the Pound. Some have said that he stepped outside of his remit in making dire economic warnings before the referendum that have not, as yet, materialised.
Indeed his predecessor Mervyn King seems to have a different view, saying recently that Britain can be more successful outside of the EU, pointing out that any predictions of a detrimental effect on the economy are highly speculative and that nobody knows what the ultimate effects of the Brexit vote will be. He also stated before the recent interest rate cut that to do so would be unwise, and that further QE would not achieve very much. However that seems to be the only thing left the BoE can do. With inflation rising to 1% it’s looking like Mr King was right and that the cut in rates was indeed unnecessary. He has also said the fall in Sterling is a welcome change as it will help re-balance our economy, and that needed to happen regardless of the Brexit vote. Personally I would not be surprised to see Mr Carney step down when his 5 year term ends in early 2018.
Sterling exchange rates unlikely to recover in short term
In truth nobody knows what effect Brexit will have on the economy, and in turn what will happen to exchange rates and Sterling over the next 3 to 6 months. What we do know is while there is uncertainty in the markets, investors will continue to shun the Pound, and that’s why Sterling remains very weak. On Thursday we’ll see the latest preliminary GDP figures for the UK, expected to show 0.3% growth for the last quarter. If it’s higher than this, expect the Pound to gain. If lower, then we could see exchange rates drop further.
If you need to convert Pounds to another currency, or convert funds back into Sterling, then getting the best possible exchange rate is crucial. The currency markets are likely to remain volatile well into next year, and large swings in the rate of exchange in either direction would not be a surprise. If you would like to find out more about the currency services we offer, and get a quote on the rate we can offer you, click here or complete the form below. We offer exceptional rates of exchange and have various contract types designed to ensure you don’t lose out if the exchange rate moves against you.