The end of last week was spectacular on the currency markets as sterling reached its highest point against the euro for nearly six years, before collapsing to its lowest for six weeks.
Volatility has been in the air as central banks wrestle with how to control inflation while encouraging growth. Indeed a thoughtful European Central Bank (ECB) president Christine Lagarde makes the cover of our current Quarterly Forecast, still free to download here.
It was comments by her on the possible need to raise interest rates that sent the euro surging to its highest rate against the dollar and sterling since November and December respectively.
So, what now? If the pound’s recent strength was based on the success of the booster programme in seeing off the most serious cases on Omicron, plus the earlier hiking of interest rates by the Bank of England than the ECB, those appear to be played out now.
The third advantage was the distance of the UK from the Ukraine and not, unlike Germany, being reliant on Russian gas. These benefits still hold good, but the news has been looking a bit more positive on the eastern front too, which will not be supportive of sterling.
Neither will, probably, though it is extremely hard to predict, the rise in the likelihood of the Chancellor Rishi Sunak moving next door to Number 10 should Boris Johnson be ousted. He is known as a smaller spending Conservative than Johnson.
Plenty to worry anyone with a major trade coming up overseas then. Do call your trader on 020 8108 5163 to discuss securing your rate, which is still far above the one, two- or five-year average.
