Sterling has managed to hold onto most of its strength this week. This is despite the storm clouds gathering, as US data yesterday suggested that the world’s biggest economy is entering a recession. Share prices fell sharply again, as did the oil price, and all just before a crucial US election…
GBP remains 1.5% up on the euro compared to this time last month. It is also still 2.5% up on the US dollar, despite weakening in the past week. So, well worth considering locking in today’s rate if you have a big transaction coming up. Just give your account manager a call on 020 7898 0541.
That the US dollar has strengthened as its economy weakens might seem counter-intuitive, but is probably down to worries about risk. In our recent account manager’s newsletter – a helpful service to those with an account open – we explained what “risk off” means and how you deal with the risk that this poses to your own international transactions.
But in brief, there is a lot going on in global economics right now and most of it is quite troubling. “When the US economy sneezes, the world catches a cold”, as they have said since 1929. Investors will be looking to hold safer assets, which these days, sadly, does not normally include the pound.
In the meantime, sterling is being supported by the notion that the Bank of England won’t cut interest rates this month, with a further cut now being only a 25% chance. However, before their decision there is plenty of high-level data on the UK economy that could change opinions.
The markets will also be on the lookout for more US data, so two highly influential employment reports will be seized on this week.
Interesting times, but worrying for those about to close on a major transaction. Why not get peace of mind with a call to your account manager?
