The pound surged this morning following data showing that while the headline rate of inflation has fallen to 8.7%, the underlying trend is still nowhere near where the Bank of England needs it to be for their forecast of 8.4%.
That means interest rate rises may have to continue in the short term, which is good news for global investors who will gain even more interest from investing in sterling. Hence they buy more sterling; higher demand raises the price; sterling strengthens.
So, it’s also good short-term news for those swapping sterling for euros or dollars, for example, for a property in Spain or France (even if it means medium term household budgets are squeezed and mortgage costs will rise and the boom for sterling could be very short term).
At the time of writing, compared to this time yesterday, exchange rate changes mean that a property in the eurozone is about 0.4% cheaper, and almost 2% cheaper than this time last month, which is quite a saving on a €200,000 home.
You can lock that excellent rate in today, with a call to your trader on 020 7898 0541.
“Forecast” has become almost a dirty word in economics right now. Yesterday the governor of the Bank of England admitted before the House of Commons that their forecasts on inflation had been woefully inaccurate. The day before, the IMF ripped up its previous forecasts of recession and for the UK to be the worst performing G7 country. It now says the UK’s long-term economic performance could be better than Germany, France and Italy.
So while we keep a healthy scepticism about forecasts, the latest Quarterly Forecast from Smart amalgamates dozens of leading bank forecasts to give an overall picture. Plus, there is superb analysis, in-depth ‘explainers’ and much more. According to some of these forecasts, sterling today is about as strong as it will get for the foreseeable future, but we will see. Download it here.
