The effect that inflation data can have on an exchange rate was brought sharply into relief with the US dollar, which has weakened by between 0.75% and 2% over the past week against the next nine most-traded currencies. That was because America’s annual inflation rate was down to 7.1% from last month’s 7.7%. Quite the drop, and quite an effect on the currency.
But what of the pound and UK inflation? This morning’s inflation was similarly lower than expectations, but still at a whopping 10.7%. Inflation declines are not the picture everywhere, as Spain’s has just come in slightly higher than expected.
Unlike USD, the inflation data has not – yet – led to any decline in the weakness of the pound. Sterling remains buoyant at 2% stronger against the euro than a month ago and around 5% stronger against the US dollar.
Worth locking in with a forward contract? If you are committed to a major purchase abroad in 2023, remaining exposed to sharp reductions in the value of your currency is a gamble.
So, while transport strikes and the risk of ending up with a 12-hour wait at A&E from falling on a frozen pavement might deter you from venturing outside, why not sort out your currency? Just give your trader a call on 020 7898 0541.
