Breaking News
Get 45% Off 0
Investors lost 37% by missing this ONE signal 😵
Read now

What To Watch Out For In GBP In The Next Three Months

By Jeremy CookCurrenciesApr 06, 2018 05:10AM ET
www.investing.com/analysis/what-to-watch-out-for-in-gbp-in-the-next-three-months-200303611
What To Watch Out For In GBP In The Next Three Months
By Jeremy Cook   |  Apr 06, 2018 05:10AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
GBP/USD
0.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/JPY
+0.05%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
EUR/GBP
+0.06%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/ZAR
-0.07%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/MXN
+0.07%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/NOK
+0.24%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Sterling was one of the best performing major currencies in the first quarter of 2018 – it ended the quarter lower than it had started against only 4 currencies: the Norwegian krone, the South African rand, the Japanese yen and the Mexican peso. But how is it likely to fare during the course of Q2?

Gains Or Losses Vs GBP In Q1
Gains Or Losses Vs GBP In Q1

Here are three things that will determine the pound’s progress over the next three months.

The May Bank of England meeting

Following the announcement of a transitional Brexit deal in March, most analysts seem confident that the Bank of England will raise interest rates at its meeting on May 10th. Currently, markets are pricing in a 77% chance of the base rate increasing to 0.75%; the highest since February 2009. While that level of expectations means that markets are unlikely to drive sterling much higher on the chances of a rate hike alone, the inflation report and minutes of the meeting will charge thoughts of additional increases in the Bank of England’s base rate later in the year.

If, as expected, the BoE raise rates in May our view is that sterling is likely to push higher as long as language from the Bank of England points to additional rate hikes later in the year.

Will pay beat inflation?

March’s jobs numbers confirmed that while last January saw real wage growth turn negative in the UK, we are just a few months away from the pressure on pockets easing if these figures are to be believed, and continue. Unemployment is higher in absolute terms but by not enough to drag the unemployment rate up; more people are joining the labour market and inactivity is at the lowest level since 2012.

What this means is that the Bank of England believes that pay will start to outpace inflation through the coming year and real wage gains are the silver bullet for the UK economy at the moment. Real wage growth is significant because it relies on optimistic employers being happy with business conditions, it allows consumers to re-balance spending figures from credit uptake and it promotes growth in generalised output with a central bank more comfortable to normalise monetary policy.

Perhaps most significantly, a return to real wage growth would be a further fillip for sterling as investors would in all likelihood see this as boosting future growth and inflation prospects.

What now for Brexit?

We now have a transitional deal that allows for more time but actually does little to influence the outcome of the decisions that need to be made or what happens in the background while this is all going on.

The questions that need to be answered cover trade, Northern Ireland, the UK withdrawal bill and the ongoing political situation in the UK with upcoming local elections at the beginning of May. We also have a European Council meeting at the end of June.

Until some of these fundamental questions are answered sterling is likely to remain static against the euro in particular.

What To Watch Out For In GBP In The Next Three Months
 

Related Articles

What To Watch Out For In GBP In The Next Three Months

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Apple
Continue with Google
or
Sign up with Email