This week was going to be the one where the Bank of England celebrated defeating inflation and gave mortgagees and businesses an interest rate cut.
That may still be the result on Thursday when the BoE’s Monetary Policy Committee (MPC) sits, but the markets don’t think so. They are pricing in an 80% chance of them holding interest rates where they are.
All sorts of positives might have come from an interest rate cut elsewhere in the economy, but the likely hold has been a lifeline for sterling. Currency investors put their money where they get a higher return – hence the pound has remained at close to an eight-month high against the euro.
Whether that lasts the next few days is the big question. For the past few months GBP/EUR has been trading within a narrow band. This could be the week that changes, so any reader who has a major transaction coming up may want to speak to their account manager on 020 8003 4915 and discuss their options.
A quick look at the currency graphs will show that the stability of the past few months for GBP/EUR has been an exception and a movement could be long overdue, whether up or down. An option may be to lock in your rate until your transaction is complete.
But these are volatile times in so many ways. If you have friends or family in trouble spots such as Dubai, why not suggest they contact us, or refer them here? Smart Currency is one of the few specialists where clients can not just talk to their account manager, but also put in long-term strategies to mitigate risks to their money.
Also coming up this week, we’ll get unemployment and earnings data on Thursday. While the markets may be more likely to take notice of what happens in the Iran conflict, the UK’s economic performance still matters.
