With Much Of Europe On Holiday Today Can UK GDP Help Sterling Bounce Back? (Colm Gilhooly)

Sterling has had a torrid couple of days against the Euro following Mark Carney’s comments at the Bank of England Quarterly Inflation.  EU inflation figures yesterday weren’t particularly robust and GDP was slightly lower than forecast but the Euro was able to hold on to most of its recent gains despite this.  However it was not exactly a glowing endorsement that events in Europe are turning around, so I suspect the Euro will remain very vulnerable.

With UK GDP revisions due out today it could provide a small boost for sterling as long as the figures are at least on or above expectations, but I don’t think the pound will go shooting up in the short term as it is unlikely to affect the markets view on UK interest rates given Carney’s recent comments.  Next week we do have UK inflation and the Bank of England Minutes, but again I do not expect either to have a significant effect on the pound unless the minutes show one of the MPC voted for a rate hike this month (again unlikely following the inflation report and that all 9 voted to hold for the last few months).

To my mind this is currently a great selling opportunity for anyone holding euro and wanting to change euro to sterling for example from the proceeds of a property sale in France or Spain.  The UK economy will still likely be on track and at some point UK interest rates will go up, it is just a question of timing, and when they do the pound will rise again.  In contrast the Euro still has a lot of problems ahead and I cannot see interest rates there going up for years- and there is always the risk that they may change policy and potentially weaken the Euro eg through some form of Quantitative Easing program similar to the UK and the US.

If you need to make a currency transfer and want to get the best exchange rate, then feel free to email me, Colm, at cmg@currencies.co.uk and I would be more than happy to explain how our foreign exchange services work.