The pound dropped 1% yesterday evening after the governor of the Bank of England Andrew Bailey said that support in the bond markets would end on Friday.
This morning GDP in August was revealed (on early evidence; it could change later) to have fallen by 0.3%.
Meanwhile, the government looks likely to struggle getting its key policies through parliament, with rebellions on fracking and benefits amongst others. The Economist has pointed out that – once the period of mourning for The Queen was taken out – Liz Truss’s authority as PM lasted less than seven days, roughly the shelf life of a lettuce.
It might all be funny if there wasn’t real people’s money, plans, pensions, mortgages and dreams at stake.
Looking at currencies, the government has a point in saying that the US dollar to pound fall of 6% between August and today is largely down to the US interest rate and the war in Ukraine.
Fortunately, most of our clients are buying in the eurozone and the pound to euro rate remains robust. It’s lower than we’ve come to expect since the vaccine boost in early 2021, but a rate that most would have been thrilled with at any point between 2016 and 2021.
Even so, there are very real risks that both GBP/EUR and GBP/USD could collapse further. October and September are traditionally the months for economic calamities (1929 and all that, Black Monday in 1987, then Britain being thrown out of the ERM in 1992 and the collapse of Lehman Brothers in September 2008).
Are we about to see another such shock? My attitude would be, why take the risk? The pound to euro rate remains strong and the appeal of buying abroad as strong as ever. Lock in today’s rate and go for it with a call to your trader on 020 8003 4915.
