If you have been keeping half an eye on the news, you will know that the conflict in Iran has pushed oil prices sharply higher and left central banks scrambling to work out what it means for interest rates. Today is the day three of the world’s biggest central banks – including the Bank of England – reveal their thinking.
The US Federal Reserve went first last night, holding interest rates where they are. That was no surprise. What caught people’s attention was the tone. Chair Jerome Powell warned that rising energy and goods prices are making it harder to bring inflation down, and the Fed’s updated forecasts suggest rates will stay higher for longer than many had expected. The dollar jumped on the back of it, which is worth noting if you are buying dollars for a property purchase, tuition fees or any other upcoming payment.
The pound slipped against the dollar overnight but has steadied a little this morning. Against the euro it has been remarkably flat – both currencies are being hit by the same energy headwinds, so neither has found an obvious edge.
Now all eyes turn to the Bank of England at noon. A few weeks ago, a rate cut looked very much on the cards. Governor Bailey had even called it “a genuinely open question.” But with oil above $100 a barrel, the conversation has shifted entirely. A hold at 3.75% is now expected. The real question is whether the committee is leaning toward higher rates later in the year – something that would have sounded far-fetched just a month ago.
The European Central Bank follows shortly after with its own decision and a fresh set of economic forecasts. Markets are now pricing in the possibility of rate increases in the eurozone this year, a dramatic change from the cuts everyone was expecting at the start of 2026. If you are buying euros – for a property in Spain or France, for instance – the next few hours could shift the landscape.
This morning’s UK jobs data painted a mixed picture. Unemployment has crept up to its highest in a decade outside of the pandemic, and the number of job vacancies has fallen below pre-pandemic levels. That normally points to rate cuts, but with energy costs pushing prices higher, the Bank of England cannot easily act on it. It is stuck.
The upshot for anyone with a currency transfer on the horizon is that uncertainty remains high, and rates can move quickly when central banks speak. If you have a transaction coming up, it is worth thinking about how to protect yourself against sudden swings.
