Sterling has bounced back from the four-month lows of last week, gaining about 1% on the euro and US dollar compared to Thursday.
However, GBP isn’t out of the woods yet, with a hectic few days for major economic data releases ahead of us.
That all starts tomorrow with unemployment and earnings, then inflation on Wednesday, Gross Domestic Product (GDP) on Thursday and retail sales on Friday.
Today is all very much the calm before the storm and perhaps the day to get your exchange rate fixed to lock in the recent gain. You can do that with a call to your account manager on 020 8108 5163.
There’s also inflation in the USA on Wednesday and news of the German economy tomorrow in the ZEW Economic Sentiment Index.
With the brief excitement over politics over until the US election in November, it’s back to economics as the main factor driving exchange rates, and more specifically interest rates.
The battle against inflation is continuing, which is why this week is such a pivotal one for the pound. Evidence of a slowing economy (lower pay rises, lower inflation, weaker GDP…) is likely to sink sterling as it strengthens the case for further interest rate cuts and lower interest rates tend to weaken that country’s currency.
In the end, your guess is as good as anyone’s as to whether inflation is beaten or not. One of the UK’s most influential interest rate setters was pointing out over the weekend that high wage growth (which we’ll be hearing about tomorrow) means that the battle against inflation is not over. Catherine Mann told the FT: “[In the latest round of annual pay deals] some people at the bottom got quite a bit of an increase, rightfully so, but the ones above them didn’t. Which means next year they will.”
Complicated and unpredictable though this is, it’s just one of the factors at play, among dozens. If, at the end of it all, is your plan to buy a property abroad, or your pension when converted to euros, or any other vital transaction, the simplest course of action is to fix your exchange rate for the duration of your exposure to moving exchange rates.
You can do that with a call to your account manager.
