The pound starts the week in an exciting position, trading around an 18-month high against the euro.
After strong gains at the end of last week, sterling briefly breached the 1.1800 mark this morning and has strengthened against the dollar.
So what’s driving sterling’s strength, and similarly, the euro’s weakness? The answer appears to lie in the UK, eurozone and US economies’ position in the so-called ‘race to normality’, in which the UK and US are currently leading in.
The pandemic has hit these economies hard and the central banks have had to put monetary policy in place, such as lowering interest rates, to encourage spending. However, now global economies are starting to recover, the central banks face a careful balancing act of when to wind down these measures so as to keep inflation on target.
At the moment, the Bank of England and the US Federal Reserve seem more likely to change these policies and return to ‘normality’, whereas the European Central Bank wants to wait a little longer. As such, markets are favouring the pound and the dollar over the euro.
However, any change in the ECB’s stance could quickly affect the pound’s current strength.
So, at the moment, it’s good news for those looking to buy abroad – you’ll get more for your pounds than you would have done throughout much of the last year or so!
If you’d like to ‘lock in’ these attractive rates, you can do so with a forward contract. Just give your trader a call on 020 8108 5163.
