The long uncertain period for sterling has continued into another month, with small but choppy changes against the euro, but all within a narrow band.
Could there be a change in the weather coming?
Against the US dollar the sun has certainly come out for the pound, hitting its strongest for a year in the past few days, and against the Australian dollar, where sterling hit a 15-month high.
The improvement against those two countries, however, can be put down to problems on the dollar sides of the equation, rather than any inherent strength in the pound. That could be the pattern this week too, as the US Federal Reserve (“The Fed”) and the European Central Bank (ECB) get in ahead of the Bank of England on interest rate decisions.
The Fed goes first, and is projected to increase interest rates by 0.25% to 5.25% at 7pm UK time this evening. The ECB follows tomorrow and is expected to raise rates by the same amount, which will take its headline interest rate to 3.25%.
The background to all this is the maelstrom of economic data out this week in both blocs, plus the collapses of three mid-sized US banks in the past few weeks, which has been squarely blamed on the Fed’s aggressive policy of monetary tightening.
So, the next few days are certainly ones where the pound could be rocked one way or another.
If you are in the process of buying a property abroad, a quick reminder that in our new quarterly forecast, available to download here, the predictions for GBP/EUR go as low as €1.05 by the end of the summer.
Anyone who might struggle to find another six or seven percent on top of the current purchase price for a property in Europe, should call their trader today on 020 7898 0541 and discuss locking in your rate with a forward contract.
