Sterling moved gently up and down yesterday before ending the day roughly where it started, only fractionally up on its lowest position since early 2021 against the euro and since 1985 against the US dollar.
However, in early trading today the pound has opened strongly.
There were no data releases yesterday in the UK as the nation watched Queen Elizabeth ll’s state funeral.
There was little to excite the markets elsewhere in the world either, although construction output was much higher in the eurozone than expected in July.
The big event of the week is the Bank of England’s interest rate decision on Thursday. Various competing factors include the government’s £150bn energy bills relief package for households and business. This is likely to curb inflation in the short-term but may fuel it in the longer term.
The Bank’s Monetary Policy Committee (MPC) wishes to look resolute on inflation, but risks tipping the country into recession (or further into recession) if it raises interest rates too fast. Hence the MPC is likely to be split between a 25, 50 or 75 basis interest rate change, even while the US Federal Reserve has, according to analysts, a 20% chance of raising interest rates by 100 basis points.
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