Sterling slowed down on Friday after a strong week, weakening against the majority of its trading partners. This was triggered from the closely-watched speech by Bank of England (BoE) Governor Mark Carney, who dampened expectations for an earlier-than-predicted interest rate increase. He stated that the strength of the pound may hinder exports and that “the recovery has some way to run before it would be appropriate to consider moving away from the emergency setting of monetary policy.” The Governor also cautioned that labour market data shows that certain weaknesses still remain, and made it clear that tightening will be only a very gradual process.
We have a quiet day today on the data front, but look forward to preliminary growth figures out of the UK tomorrow. These are expected to show growth of 0.7% in the final quarter, slightly down from the previous quarter due to bad weather, and 1.9% for the year which is 1% higher than that forecast this time last year. As ever, in this volatile times, any variance from the expected is likely to have a significant and rapid effect on sterling’s exchange rates. On Wednesday we have Mark Carney scheduled to speak again and given the impact of his speech last Friday this again could be highly impactful on sterling.
The last week has highlighted how quickly and how large a movement there can be in exchange rates in a very short period of time with sterling gaining two plus cents against both the euro and the US dollar and then giving back a lot of these gains. If you are thinking about buying or selling sterling, call your trader now to get the latest news and rates but also to make sure you are properly prepared to take advantage of these rapid movements.