Pound bounces back before the weekend

After a pretty dismal week, the pound recovered losses against a number of the majors on Thursday.

Sterling is extending gains this morning, with GBP/EUR hitting highs of €1.1232, GBP/USD advancing to US$1.3244. GBP/AUD rallying 0.7% to AU$1.7527, GBP/NZD achieving NZ$1.9400, and GBP/CAD rising to C$1.6888.

Keep scrolling to find out what news you should be looking out for today.

What’s been happening?

UK political concerns and below-forecast UK data kept the pound under pressure for the first half of the week, but the British currency staged a rebound on Thursday following the release of the UK’s latest retail sales report.

Although consumer spending dipped on the year, the fact that sales returned to growth on a monthly basis in October left some hoping for a positive fourth quarter. Other industry experts were less optimistic however.

Economist Samuel Tombs stated; ‘Sales were depressed by some one-off factors. Unseasonably mild weather - average temperatures were 1.7C above their 1970-to-2016 October average - likely was the main driver of the 1.5% month-to-month decline in clothing sales. Retail sales volumes recovered only partially from September's 0.7% month-to-month drop, underlining that consumers now have adopted a cautious mindset.’

Further support for the pound came from UK Brexit Secretary David Davis, who stated that he was hoping for a deal with the EU that ‘allows the freest possible trade in goods and services.’

He added that he believed it was ‘incredibly unlikely’ that no deal would be reached.

The euro, meanwhile, was weakened by a decline in the Eurozone’s consumer price index, with softer inflation likely to prevent the European Central Bank (ECB) reigning in stimulus for the foreseeable future.

What's coming up?

The biggest UK news on the calendar next week will be the delivery of the Autumn Budget on the 22nd.

According to Lloyds, in Chancellor Philip Hammond’s budget we can expect that the ‘headroom for significant giveaways [will] be significantly reduced. Overall fiscal stance likely to be little changed with uncertainties around the economic outlook forcing Hammond to keep his powder dry.’

However, any surprises may well inspire GBP volatility.

Other news to look out for next week includes the publication of minutes from the last Federal Open Market Committee (FOMC) gathering. The US dollar will remain sturdy as long as the minutes point towards US interest rates being increased in December.

From the Eurozone we’ve got preliminary services and manufacturing PMIs, as well as the German IFO business surveys.

Meanwhile, the Australian dollar could come under pressure at the beginning of the week if Reserve Bank of Australia (RBA) Governor Philip Lowe adopts a dovish stance on the future path of monetary policy during a speech in Sydney.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.