Sterling continued to flounder yesterday, dropping further against the US dollar and yen but remaining fairly stable against the euro. This morning, with political troubles in the US and a potential Federal government shutdown having global ramifications, there is increased volatility in the markets.
The big business story of the week in the UK is the probable announcement today of the cancellation by Prime Minister Rishi Sunak of the northern leg of the HS2. This is the UK’s high speed rail link between north and south, of which the London to Birmingham leg is currently being built.
It’s a turnaround in more ways that one. In February 2020 the arrival of the unknown Sunak as Boris Johnson’s new Chancellor of the Exchequer sent sterling to a three-and-a-half-year high against the euro. The markets thought he would be compliant, indulging Johnson’s grandiose infrastructure plans and spending wildly. Johnson described any decision to curtail HS2 as “the height of insanity” this week, but the reason for the cancellation, if it happens, is of course the spiralling, out of control costs of HS2, now likely to cost well over £100billion, and maybe double that.
Avoiding the risk that your costs shoot up and wreck your long-cherished plans is something that Smart Currency knows all about. Whether for a massively complicated project like HS2 or the relatively simple process of buying a property abroad, fixing your exchange rate is one huge weight off your mind.
For example, look at the two months surrounding Sunak’s arrival as chancellor in 2020. If you had made an offer on a €250,000 property one month before he became chancellor you would have expected to pay, in sterling, £213,300. On the day he became chancellor that dropped to £207,500. How nice! Except that exactly one month later you would have needed to find £235,000 to complete. None of this would have been your fault (or, indeed, Rishi Sunak’s, to be fair).
Sad to say, we did see people who had not taken out a forward contract having to abandon their plans when told by their lawyer that they would have to find £20,000 more than they had expected to pay.
A forward contract, taken out on the day they agreed to the purchase, would have avoided all that stress. So do give your trader a call on 020 7898 0541 today.
As this morning’s news from the US amply demonstrates, we are heading into a year of political turmoil and anything could happen to your exchange rates.
