The long period of stability for sterling could be coming to an end. Between Wednesday and Friday last week the pound lost more than 1% against the euro, and this echoed another sharp loss of 1.5% in mid-March.
Against the US dollar the pound has lost 1.75% over the past month and is now at its weakest since last November.
This morning so far the losses have continued.
It’s worth bearing in mind, however, that this is a decline from a position of strength, and GBP/EUR remains more than 3% stronger than this time last year and 2% above the five-year average. Therefore, to lock in your exchange rate – still 3% above last April – do call your trader on 020 8108 5163. Even if not making a commitment to purchase right now, it will still be invaluable to speak to an expert.
The cause of that longer-term strength has been the idea – inflation having been that much worse in the UK than in the USA or most of Europe – that the Bank of England (BoE) will need to keep interest rates “higher for longer”, as BoE officials kept saying. Like Table Mountain, to use their analogy, rather than the Matterhorn.
The question now is which central bank – the BoE, European Central Bank (ECB) or US Federal Reserve – will start climbing down the other side of the mountain on interest rates more quickly. In the absence of anyone starting yet, the money markets are obsessing over signs from each individual rate setter from those banks. So on Friday, when Dave Ramsden of the BoE said he was confident of rate cuts starting soon, the pound weakened. The previous week, when Christine Lagarde of the ECB suggested they would start cutting soon, the euro weakened.
This speculation will be reaching a fever pitch (or as close to fever pitch as banking gets) over the next few weeks, with severe risk of sterling falling further.
