Expat currency news — Pound declines after BoE unanimously holds rates
While the type of international money provider you use can impact the exchange rate you secure, with some currency brokers undercutting the rates offered by banks by up to 90 percent, picking the right time to move your money is also important. Having a little knowledge of how currencies are performing makes all the difference and our brief currency update gives you the information you need to make a move at the right time.
So, what happened last week?
Last week’s trade was coloured by heightened market volatility in response to swings in market sentiment. Developments in China have been at the forefront of trader focus as the People’s Bank of China injected a record amount of cash in the hopes of stabilising equities and the yuan ahead of a week-long break for Chinese New Year.
Emerging market turmoil has been the ‘buzz phrase’ since the turn of the year, with many developed nations cutting growth forecasts in response to external risks. Persistently low oil prices have also been dominating news with many central banks being forced to reduce inflation forecasts. The Federal Reserve, for example, is very likely to delay a benchmark interest rate hike until inflation picks up, but global cues suggest this could be a long time coming.
Demand for the British pound fluctuated thanks to mixed ecostats and ongoing uncertainty regarding the forthcoming EU referendum. Data showed that sectoral growth improved in January, allowing the pound to make some sizable weekly gains. However, the appreciation was proved short-lived after the Bank of England (BoE) voted unanimously to hold the benchmark interest rate, cut growth forecasts and published another dovish inflation report. The fact that all nine policymakers voted to hold rates was particularly damaging to demand for Sterling given that previous decisions have seen Ian McCafferty call for an immediate hike.
Pound to euro exchange rate: GBP/EUR ends the week lower, down from a high of 1.3280 to 1.3013
If you had GBP 100,000 to transfer to Europe your money would have been worth EUR 132,800 at the beginning of the week but EUR 130,130 at the end — leaving you with EUR 2,670 less.
Pound to US dollar exchange rate: GBP/USD ends the week higher, up from a low of 1.4164 to 1.4661
If you had GBP 100,000 to transfer to the US your money would have been worth USD 141,640 at the start of the week but USD 146,610 at the end.
Pound to Australian dollar exchange rate: GBP/AUD ends the week lower, down from 2.0554 to 2.0008
At the start of the week your GBP 100,000 would have been worth AUD 205,540 but AUD 200,086 at the end, losing you AUD 5,454.
Pound to New Zealand dollar exchange rate: GBP/NZD ends the week lower, down from 2.2277 to 2.1699
At the beginning of the week your GBP 100,000 would have been worth NZD 222,770 but at the end you would have dropped to NZD 216,990, losing you NZD 5,780.
So, what can you expect to happen in the week ahead?
The most influential British data publication in the coming week will be Tuesday’s Trade Balance data for December.
Wednesday’s British Manufacturing and Industrial Production data should also provoke significant sterling volatility in the coming week.
Irrespective of domestic data, however, the pound is likely to continue to struggle as the BoE interest rate decision and inflation report is likely to have a lasting detrimental impact. In addition, ongoing concerns regarding external risks and uncertainty surrounding the EU referendum should limit GBP appreciation.
Contributed by TorFX
TorFX is a specialist currency broker that offers far better exchange rates than you are likely to receive from a high street bank.