The US dollar has strengthened significantly over the weekend and overnight, apparently due to worries over a Covid-19 resurgence in China. Given the country’s ‘zero-Covid’ policy it doesn’t take much to shut a major city down, which affects the global economy. Hence, as the global economy falters, investors seek the safe haven of the dollar.
In the UK the political talk all weekend has been of a Brexit ‘sell out’, from some people, or ‘more efficient trading arrangements with our closest trading bloc during an economic slowdown’, from others.
Whether this will feed through into the currency markets this week remains to be seen, but it does feel like the economic news is playing all the old hits.
There is little on the horizon datawise this week. The longer term strength of the pound going into 2023 may depend on how deep the recession is. For the time being it remains strong against the euro, well above the five-year average even with the purple patch when the UK held the vaccine advantage.
Experience has taught us over the last one, three, five and ten years-plus not to be too wishful in our thinking of sterling’s medium- to longer-term strength. It has generally disappointed.
So to lock in this rate, call your trader on 020 8108 5163.
