After climbing against the euro yesterday, sterling received further support from UK inflation figures this morning. Against the dollar, however, the pound continues to fall.
Inflation for both the UK and US are driving currency movements and could pave the way for further interest rate hikes.
In the UK, inflation hit a 30-year high of 7% with gas prices growing a whopping 28.3% year-on-year in March, yet this figure did not include the recent energy price cap.
The US saw a similar trend, with inflation rising to 8.5%. This has intensified expectations that the US Federal Reserve could raise interest rates sooner than expected. One Fed official even warned that it was a “fantasy” to think the US could control inflation without substantial interest rate rises. If these claims come to light, the dollar could benefit further.
And, of course, we have the European Central Bank’s (ECB) next interest rate decision tomorrow. The eurozone has also seen rising inflation, and if rates are hiked, the euro could see a boost.
Inflation, interest rates and the ongoing conflict in Ukraine make sterling’s short-term future difficult to predict.
So, why not lock in today’s rate, which is still about 0.5% higher against the euro than this time last month and 4% higher than this time last year. Just give your trader a call on 020 8003 4915.
Do also look out for our brand-new Quarterly Forecast, coming later this week, to see what the major banks think is in store for sterling over the next few months.
