Exchange rate forecast

The main focus for sterling exchange rates is likely to be the Chancellors pre-Budget report on Wednesday followed by the Bank of England (BoE) Interest rate meeting on Thursday. The chancellor is expected to give more details of how he plans to halve the budget deficit over four years. Public spending cuts are expected and he may discuss banking bonuses and the so called new ‘super tax’. This could cause volatility depending on how well the report is received by the markets.

Moving to Thursday, the BoE are expected to keep interest rates on hold, but may shed some light on the future of the quantitative easing programme. This has caused market volatility in the past so you may want to consider how this could affect your currency transfer.

Pound euro rates uncertain forecasts
Market analysts are split at present about which way the pound is set to go. The Centre for Economics and Business Research in the UK has said that they see the Pound/Euro rate falling below £1 to 1 Euro for the first time and the US Dollar falling to $1.40. They put this down to the need for the pound to fall to compensate for low interest rates, in order to attract investment and demand from overseas. Last December the pound lost almost 15% against the Euro, if the same were to happen again we would certainly fall below the 1 to 1 mark.

Other analysts believe the pound may recover in the medium term if the UK shows GDP growth and the BoE’s quantitative easing programme comes to an end.