While the first week of August has certainly not been positive for sterling, with a 0.75% fall compared to last Monday against the euro, as swings go, that could be worse.
GBP/EUR remains a couple of per cent up on the five-year average, and the drop has been less severe than against the US dollar. However, to lock in this rate in case of another sharp fall, do call your trader today on 020 8108 5163.
The problem for sterling last week was the Bank of England’s interest rate rise. The money markets that drive exchange rates liked the rate rise that did happen (a quarter per cent up to 5.25%) but had wanted more.
Is there any data coming along this week that could rescue sterling? Probably not. This morning we heard from Halifax that UK property prices dropped by 0.3% last month, taking them to 2.4% less than last July. We will hear about retail sales later this morning.
However the real test for the economy, or danger area if you are already committed to a major transaction in Europe and haven’t locked in your rate, is Gross Domestic Product on Friday. The Bank of England is desperately trying to cool the economy with higher interest rates to bring inflation down, and if Friday’s result tells them it’s already working they’ll ease up on increases and the pound will fall, possibly very sharply. At least that’s the theory, but really anything can happen.
Still, if you are mid-currency-transaction and would struggle to find potentially thousands more, do lock in your rate.
