020 7898 0500It was a bit of a mixed week for sterling. Disappointing retail sales on Thursday didn’t do the pound any favours, although it still managed to climb against the euro following the ECB’s quantitative easing decision. However, it is worth noting that it strengthened against the single currency four out of the five week days to post its most consistent performance for some time.
Against the US dollar it didn’t perform quite as well and weakened Thursday and Friday following the release of US GDP figures which were better than expected.
It’s a busy week for the UK as today we have the monthly and annual housing prices from Nationwide, the Bank of England’s consumer credit report and mortgage approvals. On Tuesday we will see consumer confidence, while on Wednesday we’ll have the Markit manufacturing purchasing managers’ index.
However, all of these releases are a mere footnote to Thursday, when the BoE’s Monetary Policy Committee meet to make their interest rate decision. Opinion is divided on whether rates will rise – expectations seem to increase and decrease from one day to the next. It is interesting to consider that because the markets have already priced in a rate hike, it is possible that sterling won’t strengthen all that much if the Monetary Policy Committee decide to increase rates. If Governor Mark Carney gives some dovish supporting comments, we might even see sterling slide. Nothing is certain except perhaps this: if they keep rates on hold, the pound will likely weaken.
And therein lies the importance of currency risk management.
