It’s not been a week for the fainthearted if you’re committed to a major transaction abroad, with sterling rising and falling sharply against the euro and US dollar as it’s buffeted by economic news and rumours on interest rates.
Yesterday’s jobs data for the UK showed a big rise in the numbers of new jobs (an extra quarter of a million in the three months to April), and with unemployment well below expectations. The markets took that to mean that the Bank of England can afford to continue interest rate rises, closer to the current US level of 5.25%. The US Federal Reserve’s own rate rising programme has been demonstrably successful against inflation, which has fallen to just 4% – less than half that of the UK.
This morning’s GDP data for the UK shows a small rise of 0.2% in April for the UK economy. Pub takings were up, but estate agents were among the losers, says the Office for National Statistics.
This afternoon the Fed is making a decision on interest rates, but they are widely expected to remain where they are, unlike the UK where a rate rise next week is now effectively priced in to sterling.
Do watch out for Europe’s interest rate decision tomorrow, too, as this could easily move EUR/GBP.
For anyone with a transaction in Europe coming up, the pound’s slow recovery from the collapse of last year, where it lost 8% between early August and late September, should not be taken for granted. Sterling 4-5% recovery since April could just as easily be reversed, leaving a property buyer in the eurozone having to scrabble around for thousands of extra pounds to complete on a property purchase or risk the deal collapsing and losing a deposit.
Reading a new survey from Your Overseas Home, 34% of buyers abroad said “I need to know the price in my own currency won’t change before I have to pay for the property”. However, the fact is that it definitely will! Unless they lock their rate in as soon as they are committed.
So in a “hold onto your hat” sort of a week for exchange rates, why not lock in today’s strong rate? You can do that with a call to your trader on 020 7898 0541.
Should you know anyone looking to make international payments or transfers, refer them to Smart Currency to get £50 on your account. Plus, the chance to win your summer holiday on us, with a £250 flight voucher. Refer someone to Smart today.
