Daily Archives: August 2, 2017

Interest Rate Decision and Inflation Report set to cause volatility (Daniel Johnson)

Inflation a major concern for the UK Economy

The pound is suffering against the majority of major currencies. The UK economy was in a strong position before the call for a referendum. Cameron used it as a bargaining chip against Brussels which has had drastic results. Politicians with their own agendas has caused this monumental fall for the pound. Boris jumping on the leave train with Farage and then May failing to gain a majority victory in the election.

Inflation is now a key issue,  it hit a peak of 2.9% The most recent figures showed a fall to 2.6% which caused Sterling to weaken. I believe this to be a good thing as the closer inflation is to average wage growth  the stronger the UK economy. Average wage growth currently sits at 1.8% some way for current inflation levels. If there is a large gap between inflation and average wage growth people may stop purchasing goods and services that are now over valued. If people do begin to tighten the purse strings there is the potential for a recession.

Sterling fell in value following the fall in inflation as the chance of a rate hike became less likely. If inflation had continued to rise there was the possibility the Bank of England would choose to raise interest rates. Investors are less likely to move to the pound due to this, I do not feel monetary policy change is the solution to the UK’s problems. A stable government is essential for Sterling to rally and we also require a firm stance on Brexit talks, although I wouldn’t hold my breath.

Super Thursday could cause big swings on GBP/AUD

Thursday could cause high levels of volatility on GBP/AUD. We have the UK interest rate decision followed by the results of the Monetary Policy Committee vote. The nine members vote to lower rates, keep them on hold or raise rates. If there is a change in how the members vote, expect the markets to react. We also have the eagerly anticipated quarterly inflation report which is sure to cause volatility. Hints toward how monetary policy will be implemented going forward will be given at Mark Carney’s speech following the data releases.

Australian Trade Balance Data could influence GBP/AUD

Down under trade balance figures are released in the early hours on Thursday morning. Australia is heavily reliant on the health of its exports and this has the potential to impact GBP/AUD. The Reserve Bank of Australia (RBA) are concerned with the strength of the Australian Dollar as it is making goods and services more expensive for oversea buyers. Although I would be surprised to see any change in monetary policy short term I would expect jawboning from RBA governor Philip Lowe to try and artificially talk the value of the currency down in coming weeks.

If you have a large currency exchange to carry out in the coming days, weeks or months then you are more than welcome to speak with me directly as I will be more than happy to help you both with trying to time a transaction and getting you the top market rate when you do come to buy your currency. A small improvement in a rate of exchange can make a huge difference so for the sake of taking two minutes to email me you may find you save yourself hundreds if not thousands of Pounds. You can email me (Daniel Johnson) on dcj@currencies.co.uk and I will endeavour to get back to you as soon as I can.