Sterling has been weakening steadily since the start of the week against the euro, now wiping out all the gains of last Friday. It is still 1% stronger than last week against the US dollar, however.
We’re in a period between important economic announcements, with interest rates last week and with Gross Domestic Product (GDP) on Friday. But into that vacuum stepped the chief economist of the Bank of England, Huw Pill, a man with a short name but a big influence on exchange rates. He said that interest rates were likely to come down only in the summer next year. These comments appear to have helped to weaken the pound.
Next summer may seem an awful long time away for anyone struggling to pay a mortgage right now, but the crucial factor for exchange rates is whether the European Central Bank or US Federal Reserve start cutting theirs earlier.
You can read more about central banks and their decisions on interest rates in our new Quarterly Forecast. Along, of course, with those interesting predictions for currencies coming from the desks of some of the brightest people in the financial capitals of the world – and almost always wildly inaccurate. Download your forecast here.
One thing we can predict, however, is that Friday’s GDP result has the power, if different from predictions, to move the pound in one direction or another. The more common pattern with the pound against major pairs like the euro and dollar is that gains are gradual and losses can be very rapid. Therefore, if you are committed to a major purchase overseas and might have a problem finding thousands of pounds extra at the last minute, do call your trader today on 020 7898 0541 and discuss fixing your rate before the end of tomorrow.
