Sterling has weakened against the US dollar and strengthened against the euro over the last couple of days, following the recent pattern.
Comparing the performance of both GBP and EUR against the US dollar, both are down almost 12% over the past year. To be fair, all major currencies have weakened against the dollar, for a variety of reasons whether it be the slowdown in China or the war in Ukraine.
The eurozone has a new crisis, as if a war on its border and potentially running out of gas in a few months wasn’t enough. This is the gap between the interest rates that some eurozone countries are paying to service their huge debts, including Italy, one of its largest economies, and the much lower rate that countries like Germany are paying. With the European Central Bank needing to raise interest rates to curb inflation, the ECB president Christine Lagarde says they will be implementing an “anti-fragmentation device”.
Meanwhile, the UK faces the headwinds, to put it mildly, of a potential trade war with its biggest trading partners over the Northern Ireland protocols, rampant inflation, a potential recession, the risk of internal fragmentation of its own with a new plan for a Scottish independence referendum and, some might say, a government out of ideas. It’s possible that leaders such as Christine Lagarde, ‘Super Mario’ Draghi in Italy, or even the UK’s Minister of State for Brexit Opportunities, Jacob Rees-Mogg, will turn it all around.
However, if you are committing to one of the biggest transactions of your life in the next year or so, you may wonder if this is a situation you want to take a chance on.
Or might it be prudent to lock in your rate today, still a few percentage points above the summertime average of the past few years and quite possibly way ahead of where it will be in a few months time?
If so, do call your trader on 020 8003 4915.
