Sterling held onto most of its recent gain against the euro yesterday, maintaining a position not far its best in recent years and nearly 2.5% up on last year. Against the US dollar, the pound has gained close to 2% over the past two days, although it is still more than 7% down on where it was in September.
The pound’s recovery against the euro will be gratifying for anyone planning a major transaction or move to the eurozone. It has been benefitting from two factors. The first is a view that the UK may escape US import tariffs, given the fact that the UK and US more or less have a trade balance.
The other factor helping sterling is the idea that Kier Starmer is aiming for closer ties with Europe, as evidenced by his attending a meeting of EU leaders this week, the first British prime minister to do so since Brexit.
If you think that both those factors look a little precarious, you can lock in today’s improved rate for GBP/EUR with a call to your account manager on 020 8003 4915.
The other worrying event for anyone with a transaction that is unprotected with a forward contract, is the interest rate decision tomorrow from the Bank of England (BoE). An interest rate cut is widely expected, but the critical factor for the markets will be whether it looks like the start of a programme of cutting – like the European Central Bank – or a more cautious approach like the US Federal Reserve.
While the pound has been on the upswing, there could be further volatility this week.
