The rapidly escalating crisis in the Middle East is wreaking currency havoc. Sterling has strengthened by close to a cent against the euro since the start of the week, but just how long it can maintain that remains something of an open question.
In Westminster, the chancellor’s spring statement was a non-event from a policy point of view, albeit an awkwardly timed one. There were no surprises and no rabbits pulled from any hats. What was significant was the news that the Office for Budget Responsibility (OBR) had downgraded its growth forecasts and the possibility that higher oil and gas prices might limit the Bank of England’s ability to cut interest rates.
As this crisis unfolds, the only thing we can bank on is more sudden exchange rate shocks. With no end in sight, the simplest way to protect your budget between now and completion is by locking in today’s rate with a forward contract. Call our expert team on 020 8003 4915 to secure today’s rate.
It wasn’t all bad news as far as the OBR numbers went. Government borrowing came in below expectations, which should give the chancellor and prime minister a little breathing room. However, those forecasts were made before things kicked off over the weekend. Borrowing costs have soared since then, threatening to undo much of the government’s recent progress on spending.
The OBR did have time to warn the economy could take a significant hit from the conflict. As you might expect, that’s chiefly because Iran is targeting oil and gas sites in an effort to drive up commodity prices. And it’s been successful: major oil indexes have shot above $80 per barrel and could reach $100 in the near future, experts predict.
Europe is also feeling the squeeze. We heard yesterday that inflation exceeded expectations last month, exactly the opposite it wanted to hear as oil and gas facilities were struck in Saudi Arabia and Qatar.
As of this morning, the conflict is still spiralling. The financial system is bouncing from one headline to the next, which means your money (if left unprotected) will be at significant risk until a resolution is found.
