This morning, the pound continues its upwards trajectory and remains around an 18-month high against the euro. Against the dollar, sterling has weakened slightly as markets await US inflation data later today.
The pound’s strength against the euro, however, is still coming from the news that the Bank of England may raise interest rates in the near future (earlier, potentially, than the European Central Bank).
But the question on everybody’s lips is “when”? While some investors think the BoE could raise rates in 2022, others think it won’t happen before 2023.
We could get a clue in upcoming employment data which will reveal how many people are unemployed, especially after the government’s furlough scheme ends in September. This in turn could indicate how quickly inflation may rise.
If there are fewer unemployed people than the Bank of England expected, then monetary policy may not need to be tightened as early as they initially thought.
This ambiguity seems to be benefitting sterling at the moment, you’ll now get around 5% more euros for your pounds than you would have done this time last year.
But will this strength last as we gain more insights into the employment market? It’s difficult to know. The good news is that you can lock in today’s rate with a forward contract. So please do speak to your trader on 020 8003 4915 to do that.
And if you know anyone else that needs currency right now or in the near future, do let them know about Smart, so they too can take advantage of this 18-month high. Just click here to make a referral.
