The pound climbed sharply upwards yesterday, gaining close to 2% on the US dollar and more than 1% on the yen and Canadian dollar. The rise against the euro was more modest, at a quarter of a percent, but welcome nonetheless after days of declines.
To take advantage, call your trader on 020 7898 0541 to discuss fixing your rate for the year ahead with a forward contract.
This week’s economic data has been dominated by positive inflation reads coming out of the US and the UK. The headline rate fell from 3.7% to 3.2% in the US, while the UK recorded its largest fall month-on-month drop since 1992, down from 6.7% to 4.6% October.
As excitable as ever, markets now appear to be pricing in no further hikes to central lending rates in key jurisdictions, with US investors in particularly fine spirits. They may still be waiting for cuts well into next year, and the honest truth is that nobody can accurately predict monetary policy.
If you’d like to read more about the outlook for currency exchange as central banks pivot towards their tightening cycles, please do have a read of our Quarterly Forecast, which pulls together country-specific analysis as well as currency forecasts from the world’s leading desks. Download your forecast here.
We’re now just one week away from UK chancellor Jeremy Hunt’s Autumn statement. While the statement can often be a market-moving event, the general consensus is that Hunt and Sunak will opt to keep the majority of their aces up their sleeves for the budget in the spring, which will likely set the stage for a UK election in 2024. With that being said, there may be a bit more wiggle room now that Sunak has reached his goal of halving inflation.
However, there’s a lot that can happen before then, and the return of David Cameron to the Cabinet table is a reminder of what can go wrong for a currency. In the months before he left office in 2016 the pound had been between €1.24 and €1.44. Since then it has never been more than €1.21, a permanent fall of at 15%. Which goes to prove that when ‘black swan’ events happen to damage a currency, they can be longstanding.
Hence with so much going on in the world right now, do call your trader.
