Sterling has hit a four-week high against the euro and is currently trading close to its best since last July. It is struggling against the US dollar and some other currencies, while the markets attempt to work out the ramifications of the war in Iran and its effect on oil prices. That sterling has not collapsed against the euro will be a relief, but maybe a short-lived on.
As ever, with so much uncertainty and the pound at close to its best since last summer, anyone with a major transaction may opt to lock in that rate. It’s a choice, but certainly one to seriously consider. We are in uncharted territory. Talk to your account manager on 020 8003 4915.
The main influences on your exchange rate include risk – and how worried investors are by events and where they put their money – and where interest rates will go when oil priced at well over $100 a barrel feeds into the inflation figures. This is already raising transport, shipping and supply-chain prices, with businesses feeling it first and passing those costs onto households.
When we were all expecting interest rates to fall, could central banks instead start raising interest rates? And if so, who will move first? Higher interest rates are generally positive for an exchange rate in the short term, but the normal rules that govern exchange rates cannot be relied on.
Other than that, some of the risks that the markets were considering last month seem rather parochial now, including leadership challenges against the prime minister. His argument with President Trump will have done him no harm with his own feverish MPs, although the May local elections now less than two months away remain a risk. Will the government be blamed for rising prices anyway?
Other than all that, this is a relatively quiet time for high level data, meaningless as much of that would look now anyway, in this altered world.
