The long-awaited inflation data has left the currency markets in a bit of a quandary. The headline rate has fallen from 7.9% in June to 6.8% in July. Good news! However, economists also look at the ‘core’ inflation rate, excluding more volatile food and fuel prices. Annual core inflation has remained as high as last month at 6.9%. Indeed, prices without food and fuel added in were rising at 0.2% in June but that accelerated to 0.3% in July.
Which all means that the Bank of England will probably have to increase interest rates yet again next month, which is why the pound has strengthened so far this morning.
Consequently, anyone buying a €200,000 property in France or Spain will find that it now costs about £5,000 less than in the springtime.
Looking at the broader sweep, what you gain on the exchange rate you’ll lose on your credit card or mortgage statement. Even those with no debts are losing money on their property value right now and paying 13% more on supermarket food.
At least the cost of your foreign currency is one that you can control. To lock in today’s elevated rate with a forward contract, call your trader on 020 7898 0541.
Things can change fast in the currency markets. Reading back to the currency note I sent this day last year, I noted that inflation had hit 10.1%. What I wasn’t able to warn you of was the fact that the pound was about to go into a slide that would see it lose 7% of its value over the next six weeks, adding £11,000 to the price of that €200,000 property.
That is always the risk when you don’t lock in your rate, and we urge anyone committed to a large transaction overseas to ask themselves if they could find that sort of money in a hurry? If not, please secure your rate.
Finally, a quick reminder of our autumn referral bonus where you could win a £500 Airbnb voucher. More details here.
