Bank Of England Cuts Growth Forecast For The UK- Dollar Continues To Weaken

Following the UK Election last week, where everyone believed that the UK economy was on the road to recovery, and most Sterling sellers were gifted with amazing exchange rates following the result of the election- Unfortunately the picture doesn't look as pretty today.

The Bank of England sounded a much more cautious note on Britain’s economy, replacing extremely optimistic growth forecasts from February with steady expansion and stable inflation. (Always funny how these forecasts get released just after an election!)

Following relatively weak 0.3 per cent growth in the first quarter of 2015, the BoE on Wednesday reduced its central forecast for the full year to 2.6 per cent, from its 2.9 per cent estimate in February.

Due to oil prices, we were already aware that inflation would remain close to zero for some time, with the view for inflation to rise to around 2% by the end of 2015, which now seems slightly more realistic than their previous expectations. The BoE also suggested that interest rates would be likely to rise mid 2016, and continue gradually over 3 years until it reaches 1.5%.

We saw on Wednesday that Sterling weakened by around 2% against the Euro after this release- now for those of you who are wondering where the exchange rates will go next, I am confident that the GBPEUR exchange rates will remain over 1.30, and that over the next 12 months as the economic sentiment in the UK improves, 1.40 will be a pretty normal thing for us; however for now, I will say that if you have transfers that are imminent, then the Pound will be under pressure for the next couple of months so it may be worth taking advantage of current levels.

However for Dollar buyers, it seems your prayers have been answered, we may not be at 1.70 again, but we are getting pretty close to 1.60! This will not last for long, so for those of you who have USD requirements please get in touch and I can show you how we can lock in exchange rates for up to 36 months so you are protected from all volatility and the imminent Dollar strength when their interest rates begin to rise!