The pound has had a torrid week, falling to its lowest level against the euro since the early summer and against the US dollar since March 2020.
This hardly gives the true picture, however. March 2020 was a brief blip due to the start of the pandemic. If what we’re seeing now is a more profound statement on the strength and prospects of the UK in the global economy, then it’s at its worst for 40 years. GBP/USD is currently around 11% below the five year average.
Whereas compared to the euro, sterling remains fairly strong. It is 2% above the five year average even after the falls of the past week.
The main reason remains the risk to the global economy from (a) inflation and (b) what central banks will have to do to the economy to reduce inflation. It’s all feeling a bit 1981, when politicians were also responsible for getting us out of stagflation, rather than the Bank of England.
Speaking of which, I doubt even the most ardent political groupie will have felt the Tory leadership contest has been especially uplifting. However, a new prime minster is always an exciting time, and there may be a change in policy that will move the market, such as a limit on the Bank of England’s independence.
This may make the downside risk to sterling more likely, but that is pure conjecture.
Unless, however, you’re comfortable to leave your overseas property-buying budget to the vagaries of the market and their opinion on the new PM, do call your trader this week on 020 8003 4915 to lock in your rate with a forward contract.
