Interest Rate Cut Rumours Hit Pound Again

Euro to Pound Exchange Rate Continues Run of Strength

The pound ended last week lower than most major currencies at closing time but was still a tiny bit higher against the euro and still has relative support. However, sterling will be tested as we have some key economic data being published this week.

November’s GDP information the CPI, and retail sales statistics are all expected, and could cause volatility in the pound if they show a downturn. Discussions about the UK’s interest rates have also re-surfaced thanks to the Bank of England’s Monetary Policy Committee. At the time of writing, the pound is 1.1680 against the euro and 1.2993 against the US dollar.

Pound Holds Its Own Against Euro and Dollar

Sterling showed some resilience on Friday, certainly more than its European counterpart at least. Geopolitical tensions between the US and the Middle East are partly to blame for hitting the euro and the dollar, and price action meant that the pound’s post-election boost was maintained. This was despite comments from the Bank of England’s outgoing Governor, Mark Carney, who hinted last week that interest rates could fall.

Carney’s comments were echoed by one more member of the Bank of England’s Monetary Policy Committee, who said that any more signs of economic weakness could be followed by interest rate cuts. This takes the total to three members of the MPC, who set interest rates based on how the economy is doing.

Pound Could Weaken Over 2020

The UK’s economy has slowed down somewhat over the last few years, mainly thanks to Brexit and political turbulence in the country. The GDP stats, which are due today, are expected to show a slowdown in the three months to November. This will reflect a downturn in consumer spending and business activity before the election last month.

However, there are hopes that the economy could be on the road to recovery. Some early indications have suggested that in the month since the general election, business confidence and activity is on the rise. The Brexit stalemate meant that many investment decisions have been put on the backburner, so businesses have been reassured by the Conservatives’ majority and the somewhat clearer path to Brexit.

Unfortunately, nothing in this political climate is certain, so analysts are warning that if Brexit negotiations don’t go to plan, and a “no deal” Brexit is once again on the cards, the pound could react.

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