Sterling leapt ahead again over the weekend and is now well ahead against the euro of any point since before the pandemic and – aside from a few days early in 2020 – its highest rate since spring 2017.
The immediate cause was a speech yesterday by the governor of the Bank of England, Andrew Bailey, to a group of global bankers, saying the Bank “will have to act” to prevent inflation bedding in long term.
He is concerned that inflation has reached a point where it will start to affect people’s behaviour – workers expecting pay rises because they’re losing buying power, for example – which could lead inflation to being longer lasting than the current energy, supply and labour shortages.
Hence an early interest rate rise looks more likely, possibly as early as December, once the full effect of the end of the furlough scheme has been recorded in the data.
Two thoughts spring from this. The first is that an early interest rate rise may now be “priced in” to the value of your pounds. Hence any comment the other way – more “dovish” on interest rates, in financial parlance – could knock the pound down again at any point.
Another prompt for market movement could be different-to-expectations inflation data on Wednesday. It would be well worth your while calling your trader on 020 8108 5337 to discuss locking in this rate, as I said, very close to the best for well over four years.
The other interesting point from Andrew Bailey’s comments were his worries that the UK labour market is shrinking due to more people retiring early.
If you’re in that fortunate position, may I recommend the online property show we’re sponsoring, Your Overseas Home Virtual, on Saturday 13th November. It’s just like a physical international property show, just without the crowds, masks and transport requirements. You can speak to lawyers, estate agents. removal companies, health insurance companies, golden visa specialists and many more, all via your laptop, wherever you are.
See you there, I hope.
