Pound Sterling Buyers Benefit on Fresh Weakness in GBP Exchange Rate Complex

"Sterling buyers: I’ve got some wonderful news. Paying GBP denominated bills is now the most affordable in 10 sometimes arduous weeks," comments Joe Manimbo at Western Union, summing up the sense of relief for those foreign corporates dealing with the UK.

For your reference, the latest FX rates are available at the time of writing on Friday morning look as follows:

  • The pound to euro exchange rate (GBP/EUR) is 0.18 pct lower at 1.2464.
  • The pound to dollar exchange rate (GBP/USD) is 0.02 pct higher at 1.6690.
  • The pound to Canadian dollar (GBP/CAD) is 0.02 pct lower at 1.8191.

If you are holding out for a better exchange rate or are worried of damaging declines then DON'T HESITATE. Ensure your independent FX provider has protective stop-loss orders and buy orders set up to ensure you beat the markets. Find out more here.

Pound Dollar Rate Well off 2014 highs, Good Levels for GBP Buyers

"The pound has now fallen about a nickel from those multiyear highs touched in mid-July near $1.72. Can the better days last? We like your chances at least over the short run," says Manimbo.

So what has been driving the GBP lower?

Interest rate expectations continue to be the ultimate driver of currency market valuations at the present moment.

Expectations for a U.K. rate hike have now moved back towards early next year as opposed to later this year.

The reason for the pushing back of the timing of the rate hike rests with the so-called slack in the UK economy.

The slack is the spare capacity that must be filled before we can truly say we are in a stable and sustainable period of growth.

There are many ways of determining how much slack exists, but all markets will be watching from now on is wage growth as the Bank of England has deemed this to be their key indicator of slack.

"The big fly in the ointment remained anaemic pay growth which fell 0.2 percent. Weak incomes are a sign of the still-limited reach of the nation’s economic recovery – something the BOE singled out as a big concern in its quarterly report on the economy," says Manimbo.

Euro to dollar rate: Stagnant Eurozone economy confirmed

While the pound has been hit by concerns over wage growth we would certainly not say it is entering a period of long-term decline against the euro.

This is because the Eurozone economy is in a materially worse-off position.

The shared currency was hurt by news that industrial production in the 18-member bloc dropped by 0.3%(y/y) in June, confounding expectations for a rise of 0.3%(m/m).

"Overall, the data is consistent with a generally stagnant economy in Q2 and suggests that any further monetary support from the ECB would be warranted," says Omer Esiner at Commonwealth Foreign Exchange.

Data for Q3, like yesterday’s release of the closely watched ZEW investor and analyst morale from Germany, have suggested a decidedly anaemic start to the quarter as well.

The data out of the euro zone continues to contrast the generally positive tone of U.S. data and should keep the single currency’s overall upside very limited.