Pancake day landed in a bit of a splat for the pound, with economic data strengthening the case for another interest rate cut sooner rather than later. The traditional precursor to Lent saw the pound cut back early, weakening by almost a full cent to a one-month low against the euro by yesterday evening.
We heard on Tuesday that the job market wobbled to end last year, as average earnings dipped and unemployment hit a five-year high. This morning’s news that consumer price inflation (CPI) dropped significantly to 3% in January added more fuel to the rate cut flames. Currency markets now put the chances of the Bank of England slashing interest rates from 3.75% to 3.5% next month at over 80%.
There are still several important economic reports due out that could turn this week from bad to very bad for sterling. Securing today’s rate with a forward contract will protect your money come what may, and you can do so in the space of just a few minutes by calling our team on 020 8003 4915.
You may have seen this morning that we published a rate alert and opted to delay this longer update. We apologise for the disruption, but the pound really did move sharply yesterday and we thought it was worth addressing that directly. Just minutes after the employment data was announced, the sterling to euro rate had weakened by half a cent – the equivalent to thousands of pounds on a €350,000 transfer and underscoring how quickly this febrile landscape can impact your budget.
Friday morning is the next key friction point for the pound. That’s when we’ll get retail sales data shortly followed by a read from the dominant services sector.
Things are busy on the continent, too. A strong showing in German manufacturing could well pile more pressure on the pound before the week is out.
