The pound was well supported against both the euro and the dollar at the beginning of September, reaching 3-month highs against the euro and 9-month highs against the dollar. But what’s coming up as we look ahead to Autumn? Here are some key events, which have the potential to impact the pound.
If you need to protect your money from the risks of currency fluctuations, now could be a great time to lock in a forward contract.
As the talks are scheduled to come to a close at the beginning of October, we could see any news influencing the pound’s movements. If negotiations run right down to the wire, which they could, any speculation of a ‘no-deal’ could put pressure on sterling. Equally, any breakthroughs my cause the pound to strengthen.
So far, news of progress has been mixed at best. The Prime Minister has reportedly instructed Chief negotiator, David Frost, to drop negotiations if the EU insist that the UK follow its rules on state aid. Meanwhile, the EU are refusing to discuss fishing rights until the UK submits a plan on state aid, which the UK has refused to do so far.
So far, a deal is still possible but seems difficult to achieve. Formal negotiations started again on the 7th of September.
Upcoming economic data will reveal how the UK economy is faring. With local lockdowns continuing to be enforced and the furlough scheme ending in October, the markets will definitely be looking out for signs of how this has affected the UK. GDP data is due to be released next week, which is a clear indication of how much the economy has grown on a monthly, yearly, and three-month basis. At the end of September, a quarterly figure will be released.
Other data to watch out for is Purchasing Manager Index figures, which measure the performance of the manufacturing and services sector. The data is derived from a survey of 600 industrial companies and it’s considered a significant indicator of how the economy is performing as a whole.
Bank of England
The Bank of England will hold their next monetary policy meeting mid-September. It will be interesting to see if they decide to expand their bond-buying programme or there is any suggestion that interest rates could be cut further.
In a recent meeting, Bank of England Governor, Andrew Bailey, said that it’s difficult to know exactly what scars the pandemic will leave on the economy, but cutting interest rates could happen if there is a strong case for it . Any moves that the Bank make which suggest that economy is suffering, or going backwards, could cause the pound to weaken.
News from Europe and the US
As we’ve seen recently, news from Europe and the US has the potential to influence the euro and dollar, which, in turn, effects the pound’s position for GBP/EUR and GBP/USD. The dollar has been suffering recently due to a change of stance from the Federal Reserve. Any news surrounding the upcoming Presidential election could also affect the greenback’s position in the coming weeks and months.
News of how the European economy is coping with the pandemic will also be something to watch. Infection rates are rising in some European countries, which could have an impact on the European economy in the coming weeks and months.
Your next move?
The outcomes of the above events are unpredictable, so it’s impossible to know how the pound will fare. As complex as the currency exchange markets are, however, there are simple ways for property buyers to purchase their dream home abroad safely – without the risk of losing money through no fault of your own.
For most of our clients, the solution is a forward contract. Essentially, it means that you lock in the same exchange rate for up to twelve months, so any drop in the rates does not affect you.