The pound has ebbed and flowed over the past 24 hours in response to speculators betting on whether the Bank of England will lower interest rates at its September meeting tomorrow. It is currently a little down since yesterday morning against the US dollar and euro, but with GBP/EUR still 2% stronger than this time last year and around 4% stronger than the average of the past five years. Still well worth considering fixing today’s strong rate for the year ahead with your account manager, or having a chat about your options, on 020 7898 0541.
The Bank’s Monetary Policy Committee (MPC) has been expected to keep interest rates where they are. However, with the US Federal Reserve believed to be about to make a large cut of half a percent, yesterday the markets started to think that maybe the MPC would feel it has to follow. As the pound tends to follow UK interest rates, the pound fell against the euro and US dollar.
But today’s inflation figure, just released, showed that while headline inflation remained steady at 2.2% annually, going deeper into the figures reveals it is still rising in key areas. Core inflation, which takes out the more volatile items like food and energy, rose to 3.6%, while services inflation rose to 5.6%. Which all looks like delaying an interest rate cut for another month. Of course they could still surprise us, in which case the pound is likely to drop sharply in the next 36 hours.
If you are one of those fortunate people about to make a life-changing move overseas, or a large purchase, and that transaction will not be completing soon, today’s strong rate may not last that long – so please do consider protecting your interests.
