Yesterday was a difficult day for sterling, losing close to 0.6% against the euro. By close-of-play, it regained some of its strength, but remains 0.4% worse off this morning.
Despite these losses, the pound-to-euro exchange rate remains 1.6% higher than it was this time last month, suggesting it’s a great time to buy euros.
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This morning the UK inflation rate remained unchanged at 8.7% in May, above forecasts of 8.4%. This is over four times higher than the Bank of England’s (BoE’s) 2% target, which suggests policymakers are likely to tighten interest rates in an attempt to reduce inflation.
The BoE’s interest rate decision is due at midday tomorrow and economists eagerly await not just the rate, which is expected to rise to 4.75%, but the comments surrounding it from the Bank’s MPC members.
This week has been jam-packed with speeches from the US central bank, the Federal Reserve, however it was the US housing starts that gave the US dollar its boost against the euro.
The USD gained 0.5% on the euro yesterday following the news that US housing starts increased a staggering 21.7% in May – meaning the housing market across the pond is at the very least stabilizing.
While the pound is currently strong against most of its major rivals, whether it will last begs to question. Will you take the risk?
If not, have you looked into the benefits of a Forward Contract? It allows you to lock-in a favourable exchange rate for up to 12 months and can help you manage your currency risk. Simply call your trader on 020 8003 4915 today to get started.
