CURRENCY EXCHANGE: Inflation boosts Pound, but expect volatility next week

EDITOR’S NOTE: Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate in the week gone by.

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Article 50 will be triggered on Wednesday 29th March. The first major step in the UK’s leaving the European Union will start in earnest and the negotiations with Brussels and Westminster will begin. We’re expecting a volatile trading week and those of you that have read these reports in the recent past will know that virtually everything has been boiling down to this. If you have an immediate transfer requirement then you may not want to run the risk of a further shift down.

It is tempting to look at what the market has done this week and perhaps feel confident about the near term future. Inflation leaped to 2.3% in February, up from 1.8% in January. The increase has pushed the rate above the Bank of England’s 2% target and is at its highest rate since 2013. Higher inflation is directly linked to the BoE raising interest rates so the market is expecting this to happen possibly sooner rather than later. Sterling has had a strong move upwards over the last couple of days due to this, but we’ve softened a little towards the end of the week.

With next week being so pivotal in mapping out the social, political and economic outlook of the country then the rate of exchange could genuinely be subject to a big swing. Horrific though they were, the atrocity seen in London this week has not been detrimental to the pound’s positive run. Ordinarily after terrorist activity we see the currency of that country affected negatively.

Going into Wednesday, it’s important to remain open to the concept of quick change and aware of the market conditions.

After Article 50, it will be a step into the unknown with the long protracted negotiations taking place. Quite how much information is available remains to be seen but the pound doesn’t like uncertainty as we know. On this basis, look ahead with positivity. Expect bad news and hope for the best.

This article is written by a foreign-currency broker working for TorFX, a forex broker established in 2004 to provide foreign exchange and international payments to both individuals and companies. TorFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. Their FCA number is 517320. To verify their authorisation, you can visit the Financial Services Register and search the register using their FCA number. SPI is not responsible for the opinions of guest contributors.

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