Sterling has leapt forward against all major currencies this morning, strengthening by 0.7% against the euro and US dollar. Against the dollar, the pound reached above $1.40 this morning, reaching very close to a three-year high.
Against the euro, sterling remains around 4% above the average for 2020 and 1 or 2% above the five-year average.
The immediate cause for sterling’s resurgence is the local election results that came in over the weekend. These were seen by the currency markets to reinforce the position of the Johnson government both against the Labour Party and also against another Scottish referendum any time soon.
The currency markets favour two things above all else: political stability and economic success. Another measure of economic success – or at least household optimism – is house prices, and this morning we’ve seen the Halifax House Price Index show an annual property price rise of 8.2% in the year to the end of April. This is among the highest rises they have recorded, and well ahead of expectations. The monthly rise was 1.4%, against an expectation of 0.4%.
This all looks like excellent news, especially for anyone seeking to sell up in the UK and move abroad; who get the double whammy of a more valuable asset to sell and a better exchange rate to buy.
Where that will come unstuck is (a) where overseas prices are also rising and (b) if sterling subsequently drops mid-purchase.
Both of these are a distinct possibility. The picture of prices abroad is very mixed. In the USA house prices in the past year rose by 12.2% (according to the FHFA), and in France by around 4 to 6.5% according to the notaires.
Likewise, with vaccine success now priced in, the improvement in European vaccine programmes which are now only a month or so behind the UK could easily hit the value of your pounds abroad.
Therefore, do call your trader about locking in your rate with a forward contract, on 020 8108 5163.
