The pound has climbed again this morning, in particular against the euro, following news that inflation has failed to fall quite as expected in the past month. GBP/EUR is now close even to beating the longstanding high of summer 2022.
Although inflation remains at 2% overall, core inflation rose by 0.2% in June. While a significant fall from 0.5% in May, it’s not quite as low as expected. This has cut the chance of an interest rate cut at the next Bank of England meeting, now just over two weeks away on 1st August.
The pound remains frothy, still at those highs we’ve seen for the past month that were originally prompted by the French election. But where will the impetus come from to keep it there? With the election out of the way and the new Labour government enjoying its honeymoon period, there is plenty of risk of a reversal.
The schools break up for summer in two days and summer is rarely kind to sterling. The summers of 2019 and 2022 both saw GBP/EUR lose 4% to 5%.
There is certainly plenty of upcoming data for the markets to consider, starting with employment and earnings data tomorrow and continuing with retail sales early on Friday morning. Signs of a weakening economy and labour market tomorrow will put rate cuts back on the table and could sink sterling.
So, to fix today’s rate and enjoy a summer of exchange rate stability for your own international transactions, call your account manager on 020 7898 0541.
