Positive economic data from the UK last week sent the pound back up to a level last seen in early December, when the markets began to price in a Boris Johnson victory. GBP/EUR is a good 3% above the average since early 2017.
This is a historic week for the UK, leaving the EU on Friday night after 47 years, although it is amazing how – apart from a few arguments about Big Ben bongs – Brexit seems to have disappeared from the news headlines and discussions. But for the immediate fate of the pound, Thursday’s interest rate decision from the Bank of England (BoE) is a much bigger deal now.
It could still go either way. The BoE’s Monetary Policy Committee will vote for an interest rate cut from 0.75% to around 0.50% if they think that Brexit – and anything else, such as the coronavirus crisis in China – is likely to hurt the economy. However, the evidence from various data releases on Friday, is that so far it isn’t. So the decision remains on a knife edge and so do prospects for the pound. The pound will probably rise if the current rate stays on hold, or fall if there’s a rate cut – still the likelier option according to most analysts.
If you haven’t downloaded our new Quarterly Forecasts yet, they illustrate all the main factors that will affect GBP, EUR and USD over the next year, and in particular in the period up to Easter.
Why not download them – they’re free – and then call your trader on 020 8108 5337 to discuss how to move ahead with your own currency strategy?
With the pound riding so high, a forward contract that locks in today’s rate for the year ahead looks like the safest bet.
