Sterling dipped yesterday, weakening by around a quarter of a percent against both euro and US dollar yesterday.
However, this morning’s inflation figures, showing a monthly rise of 0.6% and annual rise of over 2% – way ahead of the expected 1.4% – have already moved sterling upwards.
If you’re wondering how inflation affects currencies, the essential link is that if prices are rising too fast then the Bank of England tries to cool them down by raising interest rates, effectively taking money from anyone with credit card debts or a mortgage.
But if investors can get a better return from UK interest rates and money pours into the UK, then the pound strengthens.
That is why the other big event of the week is the US Federal Reserve (America’s central bank) decision on US interest rates at 7pm UK time today. If there are signals that the US could raise interest rates earlier than expected then the dollar will probably strengthen.
Apologies for the very simple economics tutorial, but these are the kinds of things that obsess currency speculators and will affect the price of your property or lifestyle abroad.
Your trader will of course be up to date on the numbers that will affect your transfer, and will guidance on the best timing for your purchase accordingly, albeit without the benefit of a crystal ball. Call your trader on 020 8003 4915 for further insight.
However, it is because of the complicated and unpredictable nature of the currency markets that we always suggest reversing the process and starting with your own needs, not the government or Bank of England’s.
Work out how much you need and lock in that rate with a forward contract.
