EDITOR’S NOTE: A rash of weak economic data from the UK last week put the pound on the skids. Foreign currency exchange specialist Luke Trevail explains.
It’s been a bad week for the UK sadly, with data releases compounding the woes for Sterling as it stutters closer to the EU referendum next month. The latest PMI survey indicated that the UK’s service sector grew at its lowest pace for three years in April. Earlier in the week we learnt that manufacturing activity contracted last month for the first time in three years whilst construction activity grew at it slowest pace since 2013.
This triple whammy of negative figures have got some economists referring to the possibility of a recession once again, and should act as a stark warning that regardless of the threat of Brexit, the UK’s ability to continue to grow strongly to a point of recovery after a turbulent last few years remains anything but certain.
In the short-term the referendum will continue to dominate with the campaigners ramping up efforts to get a hold of the public’s backing. As mentioned previously, momentum behind one of the camps will probably have an impact on the market, and you can expect to the see the peaks and troughs on GBP-EUR rate over the coming weeks. Early suggestions are showing that it seems more likely that we will vote to remain in the Union, which you’d expect to prop the pound up a touch from the two year lows that we saw just 4 weeks ago.
As may be clear, it’s very difficult to give any clarity over the outlook for Sterling. In the medium-term we know that the referendum will have an effect, but in the short-term you are well advised to keep in contact with your broker regularly as the tug-of-war like struggle of this market will only get more erratic in the coming weeks.