In yesterday’s post I outlined today’s UK Mortgage Approvals, Manufacturing PMI and Credit data as things to watch for any signs of a slowdown in the UK economy. Unfortunately for clients with GBP to convert, that’s exactly what we’ve seen a short while ago. You can see live interactive charts on this site here to see how various Sterling pairs have reacted.
All readings came in below what the markets were expecting, sending Sterling lower against the Euro, Dollar and other currencies this morning. Coupled with last week’s poor GDP numbers, the economic outlook in Britain is looking less rosy than it was. Overall business conditions are looking rather uncertain. Also, with the political uncertainty in the UK government coupled with Brexit wobbles, there is a lot of downside risk for the Pound at the moment.
Sterling/Dollar rates could fall further this afternoon if the raft of US data at lunchtime confirms that the US economy is continuing to expand. For those looking at Pound/Euro rates, the next few days could provide some direction with EU GDP numbers due tomorrow along with Eurozone Manufacturing PMI’s. The UK also releases construction PMI’s that could well have dipped due to the cold weather of late.
Will the Pound recover in the short-term?
There’s not much that I can see that is going to boost the Pound in the short-term. Brexit jitters are starting to take centre stage again, with little progress being made with the Irish border, and this issue threatens to derail the progress with Brexit that we have seen of late. The Conservative government are still locked in internal battles between Remainders and Brexiteers, and this isn’t helping with negotiations at all.
Anyone with Pounds to convert this month may wish to consider their options. One things you can do to remove your exposure to a volatile market is fix your rate now with a Forward Contract. This allows you to freeze the rate now but only pay 10% of what needs to be converted. The guarantees your rate and protects you against a further drop in the value of Sterling.