Sterling has started the week nervously, but remains about 0.75% stronger than last Monday against the euro. As we reach the last day of the month it also ends July up on the euro and 1.75% better against the US dollar.
This is a big week for sterling, and for the Bank of England (BoE), where all that could be lost. On Thursday the governor, Andrew Bailey, and the other eight members of the BoE’s Monetary Policy Committee (MPC) will be making their decision on interest rates. They face a tricky choice. Because while the US and eurozone have seen rapidly falling inflation (in the US it’s down to just 3%) and can start pausing or even stopping the painful interest rate rises, in the UK inflation is still at 7.9%.
Can they afford to take their foot off the brakes on the British economy, or will they raise interest rates again and pile more financial burden on UK households and business? Most analysts are betting on another quarter percent rise to 5.25%, but if that does not happen, sterling could sink very fast indeed.
Or indeed if it does happen sterling could sink very fast. That is the problem, no one can forecast what will happen, it’s just guesswork.
If you are committed to a property purchase or other large expense abroad, and your budget is not secured with a forward contract, you should be prepared to find many thousands of pounds more to complete if the Bank of England’s MPC surprises the markets.
However, you could instead lock in your rate, and spend the rest of the week planning your escape from the incessant rain! To do that, just call your trader on 020 8108 5163.
You can read much more about all this, and see forecasts for exchange rates from the lading financial institutions, in our new Quarterly Forecast. Download your copy here.
