Pound Slides Further ahead of Central Banks Meetings and GDP Data

The pound has continued to depreciate against the US dollar, falling down to a nadir of GBP/USD $1.307 as trading began this morning GMT, sterling has lost ground against the dollar over the past 24 hours as the UK faced more negative sentiment over its economy. However the pound bounced back trading at 1.3123 amid expectations of rate cut by the bank of England at the next meeting.

On Wednesday, gross domestic product (GDP) data will be released in the UK, although the data will not include Britain’s economic performance post Brexit, the GDP figures could prompt further actions by the Bank of England.
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In the latest quarterly survey from the Confederation of British Industry (CBI), optimism over the general business situation in the UK fell to its lowest level in this study since January 2009, in the aftermath of the financial crash, expectations for total new orders growth were at their lowest since January 2012, with output growth set to ease resulting in higher unemployment.

There was some positive news, as manufacturing output and domestic orders saw firm growth over the past quarter, but this is not expected to continue over the next three months.

The 506 manufacturers who took part in the survey, said that output rose at its fastest pace in two years, but export orders were flat, its uncertain whether the falling pound can rescue that situation.

Looking ahead to the next quarter, the anxiety over economic and political circumstance overseas, and how that could effect exports are at their highest level since 1983.

Although competitiveness in international markets has improved at the strongest pace in over six years it is believed, with a further boost expected next quarter, subsequently export orders are anticipated to rise above average pace up to October, the respondents said.

Planned capital expenditure on buildings and plant and machinery is set to ease, as investment is expected to be lower in the coming year, but the two categories are still in line with average levels.

Against the euro, the pound has also steadily lost ground, with the EUR/GBP rate declining to 0.8384 , as the Germany Ifo business climate beat expectations yesterday,

UK Banks Warn of Negative Interest Rates

The Royal Bank of Scotland and the Natwest bank have both warned business that they may have charges for future deposits, if interest rates fall lower as they currently are, the banks have made it clear that personal customers will not be effected by any such move.

Action is to be considered if the Bank of England base interest rate falls below the zero mark, UK rates have been at a record low 0.5% low since the height of the financial crash in 2009, surprisingly being held at that level this month, when it was widely expected that they would fall to 0.25%.

UK and Ireland in ‘Brexit’ Talks

The pound could be effected today by the outcome of talks between the UK Prime Minister Theresa May, and her Irish counterpart Edna Kenny, in discussions that will take part in Downing Street, as political news is likely to effect sterling more today as economic data is sparse.

The UK and the Republic of Ireland have strong trade links, and the future of the Common Travel Area negotiated by the two parties in the 1920’s will also be reviewed, there are fears that there could be stricter controls between the Northern Ireland and southern Irish border.

UK Chancellor Philip Hammond has begun discussions with China on a multi-billion pound free trade deal, according to FC Exchange media outlets in China reported earlier this month that the Chinese Ministry of Commerce wished to have a free trade deal with the UK, which would be a massive coup for the new government.