While exchange rates yesterday were a little calmer, with the pound, euro and dollar staying largely flat, the broader trend of the past week remains the same. The dollar is down. The euro is up. The pound is in the middle.
In fact, the dollar has had the worst six month start to the year since 1973. A more than 10% slide against the pound since President Donald Trump took office in January.
In the UK, the Office for National Statistics revealed that disposable income is down by 1%, meaning people have less money to spend at a time when food costs are rising. This squeeze is also appearing in house prices, which fell by 0.8% in June, driven in part by April’s stamp duty increases.
These declines are making it harder to ensure the buying power of the pound and dollar when making purchases abroad.
To secure certainty for your budget, lock in today’s GBP/EUR rate with a call to your account manager on 020 8003 4915.
The story in the EU is quite different, as yesterday brought the news that the European Central Bank had hit its target of 2% inflation.
The difference between the EU, UK and US economies is stark, as was highlighted this week by the chairs of the different central banks.
Bank of England Governor Andrew Bailey indicated an interest rate cut is possible next month because the UK’s job market has become weaker. Essentially, with fewer jobs and lower pay, the risk of inflation is falling, making a cut possible.
Meanwhile, Chair of the US Federal Reserve Jerome Powell says that despite achieving lower inflation and a strong jobs market, he’s been delaying interest rate cuts because he doesn’t know what impact Trump’s trade tariffs will have on the market.
And, it’s a completely different picture in the EU, as European Central Bank chair Christine Lagarde yesterday said of the inflation rate news: “I am not saying ‘mission accomplished’, but I say ‘target reached’.” This is despite all the trade uncertainty that Trump’s tariffs brought at the start of the year.
With such dramatic differences and plans, it makes planning for purchases and transfers in different markets all the harder to navigate and predict. A change in one market can cause significant ripples in exchange rates around the world.
