Last week sterling made a recovery of sorts, strengthening by around 0.5% from where it started the year against the euro.
If you put that in a longer context, it’s below the boost that the currency enjoyed in the later days of the pandemic but well above the post-referendum lows of the previous few years.
Not a bad rate to lock in with a forward contract, if you’re ready to make the break abroad. Why not call your trader on 020 8108 5163.
Exchange rate movements in recent months have all been about the central banks in Europe, the US and other major economies trying to get inflation back down to acceptable levels. Acceptable is around 2%, from the current 6 to 20% level. Spain has 6%, but the European Central Bank also has to worry about, for example, the Baltic states with around 20%.
You might think that the Bank of England has an easier job, yet inflation here is still staying stubbornly above 10%.
Since the central bank has to balance raising interest rates to beat inflation, with its second job of keeping the economy growing, it’s all something of a balancing act, with exchange rates the collateral damage. You can read more about that, and see when the next interest rare decisions are, in our new Quarterly Forecast, free to download here.
This week we’ll be hearing the Purchasing Managers’ Index (PMI), which is an excellent gauge future economic performance – just the kind of thing that central bank interest rate setters base their decisions on. That’s tomorrow morning. There is also some data on business optimism from the CBI tomorrow that could swing the market.
