Sterling crashed to a new low against the US dollar yesterday and is now down to levels last seen in midsummer 2020, the immediate aftermath of the pandemic’s first wave.
The situation against the euro is better, for now. Although sterling has lost 2% in two weeks it remains much closer to the peak it gained at the start of the year than to the parlous state it was in last summer.
You certainly would not want to bet on it staying there, however. Do read our brand new Quarterly Forecast to see what the major banks are predicting, along with plenty of top level analysis from the experts at Smart.
Threats to the pound are coming from so many directions it’s hard to now where to start. Firstly there is the risk-off mindset in the currency markets. When one of the world’s biggest oil and gas exporters goes to war with one of the world’s major food exporters investors look for safe assets, such as the US dollar and Japanese yen – not the pound.
And when the Chinese economy threatens to tank due to massive Covid lockdowns, again, investors flee from riskier markets such as the UK.
Lastly, with the cost of living crisis, high inflation and low growth, the UK faces the possibility of recession.
Those are the negatives. However, the fact remains that sterling is currently at a level that many overseas property buyers would have been thrilled with last spring and summer.
To lock that in with a forward contract, call your trader on 020 8003 4915.
Please don’t be someone who hopes against hope that sterling will regain the strength that, in reality, it had only held onto very briefly. Having been involved in currency risk management for over 15 years I know how dangerous and how disheartening such wishful thinking can be. It’s far better to remove the currency risk and avoid those sleepless nights.
