The pound starts the week close to where it began last Monday against the euro, but after a few days during which it fell by over 1% in the space of a few hours on Thursday.
The reason was the Bank of England’s Monetary Policy Committee (MPC) meeting, which raised interest rates to 0.75% – where they were before the pandemic lockdowns began two years ago this week. Why a rise in interest rates would cause the pound to fall, is down to the single dissenting opinion on the nine-person committee.
Deputy Bank governor Jon Cunliffe voted against, due to the effect that rising prices were already having on household incomes, and this “dovish” attitude caused the pound to fall as markets worried that the sentiment could become more widespread in the committee over the spring.
Speaking of inflation, it will be the big data release of the week, on Wednesday morning, then later in the day there will be the Spring Budget from British Chancellor of the Exchequer Rishi Sunak.
You may remember that just pre-pandemic the pound shot up when Sunak was appointed Chancellor, at the behest of Boris Johnson and Dominic Cummings, as the markets thought he would be a high-spending Chancellor. As indeed, he was, though due to the pandemic, not for the reasons expected.
This Budget could be very different, with a tightening of belts all round, and that could well send GBP/EUR and other sterling pairings lower.
So, with the next Bank of England MPC meeting not until May, if you don’t wish for your own budget for buying or moving abroad to be defined any further by either Rishi Sunak or Jon Cunliffe, please call your trader today on 020 8108 5163 and lock in today’s rate.
