The pound is starting the week at its strongest for over two years against the euro. Perfect timing for anyone looking to buy a property in the eurozone, or to organise regular payments there, as they can fix today’s rate for the year or two ahead. You can do that by calling your account manager at 020 8108 5163.
To put the value of that in perspective, 25 months ago GBP/EUR was stronger than today, but over the course of six weeks lost 8% of its value. This caused enormous problems for those who agreed the price of a property in euros before it fell and then were faced with finding tens of thousands more to complete.
The same could happen again – there is always that possibility. The prompt for sterling’s rise lately has been the refusal of the Bank of England to budge again on interest rates while much of the rest of the world is cutting theirs. And the reason for that is that while shop, food and energy prices have come down to a steadier rate of inflation, prices for services are still rising fast.
Later this morning we will get some data from the business community that might affect that. The S&P Global PMI (Purchasing Managers’ Index) is a survey of business leaders. A number over 50 means that they are positive about the next month overall (based on hiring expectations, order books etc) while below 50 indicates pessimism. So far this morning we have heard France and Germany’s – which was generally pessimistic – and at 9.30 we will get the UK’s.
As soon as the markets feel that the UK needs to cut interest rates, the pound is likely to fall sharply, and that could come at any time.
For now, however, this looks like an excellent time to fix the rate with a forward contract.
