Will the UK cut interest rates and how will it affect my currency purchase?

Will the UK cut interest rates and how will it affect my currency purchase?

Sterling to Canadian Dollar exchange rates are trading up around two points at 1.75 today. With a quiet week for Canadian Data this week, let’s look at the factors from overseas affecting the price you pay for your currency.

GBP/CAD graph

cut interest rates

Will the BoE cut interest rates?

One of the main talking points of the week is the Bank of England’s interest rate decision on Thursday. With such huge uncertainty over the future of the UK economy following the Brexit, Investors have held off putting money into the Pound and it is beginning to have an effect on the economy.

The latest figures suggest the Service sector has followed the example of Manufacturing and Construction with the fastest decline in over seven years, since the beginning of the financial crisis.

According to Markit, an interest rate cut is now a “foregone Conclusion” at this month’s MPC meeting. The only uncertainty is what and how much stimulus packages will they implement along with this. It s expected that a cut of 0.25% is likely, bringing them down to a new record low of 0.25%.

Given the figures have not been half as severe as the “remain camp” were threatening, and the fact the BoE has various tools at their disposal before cutting rates. My personal opinion is they will not cut rates as soon as Thursday. This would also severely damage the already fragile banks profits.

What will happen to the exchange rates?

If the Bank of England do go ahead with a rate cut on Thursday, we are likely to see a decline in the exchange rates. How severe, only time will tell as this may have largely priced into the market already.
For that exact reason, if the BoE decide to leave rates on hold, we could see the Pound recover and gain ground against the Canadian Dollar.

How to protect your currency purchase if the exchange rates fall

If you are worried about what will happen if the exchange rates fall, speak with your dedicated account manager today to discuss the various options available to you.
You can lock into a rate of exchange for up to two years into the future and target rates above the market, while protecting yourself if the exchange rates move against you.

If you don’t have an account with FCG, click the link to open a free, no obligations trading facility today and find out how much you could save.

Alternatively, if you just want a free quote on your currency purchase, contact me directly n the details below or complete the enquiry form.

Richard BeaumontWritten by:
Richard Beaumont
T: 01442 892 060