The pound gained over 0.75% against the euro last week and well over 1% against the US dollar. The main reasons for that were the apparent continued health of the UK economy compared to Europe’s, as evidenced by the Purchasing Managers Index (PMI), and consumer confidence readings.
That puts sterling today at well over the average of the past year. To lock in that gain with a forward contract, or make a trade today, call your trader on 020 8108 5163.
While bosses in the British service industries were broadly optimistic (a PMI reading of 50.5) in Germany’s service industries they were a bit pessimistic (48.7) and in the manufacturing industries very pessimistic (42.3). The outlook for the eurozone as a whole was very similar.
This all led to the governor of the Bank of England Andrew Bailey and other members of the Monetary Policy Committee (MPC) to warn that interest rate rises might need to continue.
The next meeting of the MPC isn’t until 14th December and while the avuncular Mr Bailey probably doesn’t want to be Scrooge, raising interest rates for the British public just as many of us are piling money onto a credit card, the money markets would welcome such a move and the pound has strengthened accordingly.
There is not a huge amount of high-level data before 14th December, and with little else to chew on the markets may well choose to sell the pound at the slightest hint of a reversal in mood.
So, beware. Please don’t take today’s strength as any indication of where the pound is going.
In our most recent quarterly forecast, the majority of major banks foresaw the pound gradually sinking through the early part of next year, some to well below the €1.10 mark. If the pound losing 5% of its value would be problematic for your plans, please call us today and we can remove that risk.
