Sterling starts the week exactly where it began last week, but two-thirds of a percent up on the start of May and 1% up on this time last year. Against the dollar you can double most of those values – GBP/USD is 2.25% up on this time last year.
Those gains are looking a little fragile this morning, so call your account manager on 020 8108 5163 if you are committed to a transaction overseas. Now could be an excellent time to fix that rate for the year, or more, ahead.
Although sterling’s recent strengthening was prompted by the election, comparative interest rates between the UK, eurozone and USA are the main drivers now. And this week we have an interest rate decision from the European Central Bank. The ECB is expected to cut interest rates but this is largely “priced in” to the value of euros now. Whatever happens, there may well be movement in GBP/EUR on and around Thursday.
There isn’t a great deal on the UK side until then, and Bank of England officials will be keeping their own counsel until the election is out of the way. Then next week it all revs up again on the UK side, with unemployment and earnings and GDP.
The pound can also be knocked by data from other parts of the world. For example, this week there will be important employment data from the USA. “Non-farm payrolls” is one of those boringly innocuous sounding phrases, but it is one of the most eagerly awaited bits of data and never more so than with only six months until the US election. It also influences US interest rates, which in turn affects global business, stock markets and, eventually, the pound in your pocket – at least when you’re spending it abroad.
You can avoid any stress or worry over exchange rates by simply fixing your exchange rate with a forward contract.
