The start of a pivotal week for the pound and US dollar has started very much in sterling’s favour. It gained 0.25% in early trading against the US dollar and wasn’t too far behind that against the euro.
The pound’s strength may come as a surprise, bearing in mind the endlessly negative headlines around the government, with hundreds of thousands of protestors in the capital at the weekend and even threats to topple the prime minister from within his own party.
However, the markets are looking at the financial side of things and the only game in town this week is interest rates – with the Bank of England deciding on Thursday and the US Federal Reserve the day before.
Before all that we have a welter of data, with earnings and employment tomorrow and inflation on Wednesday.
You might think that the British public would be happier, given their recent pay rises which have been averaging nearly 5%. As highlighted by the Financial Times this morning, average pay rising at this rate is not helping the Bank of England to reach its 2% inflation target. These earnings rises feed through into pension and benefits increases too.
The government will be desperate to change the narrative, and they were not helped by last week’s GDP result which showed a flatlining economy in July.
Where does all this leave those with a big and important international transaction coming up? Sterling against the euro is poised just above both its long-term (five-year) average and the summer average. So, amidst a hectic week for sterling, it has never been more essential to be proactive and take charge of your currency strategy.
To secure certainty for your budget, lock in today’s GBP/EUR rate with a call to your account manager on 020 8003 4915.
