Cost of living crisis damages the Pound

By Matt Vassallo

Market support for Sterling has softened again this week, with the media’s focus on the UK’s cost of living crisis intensifying once again. Reports this morning have confirmed that the typical household energy bill will rise to £3,589 per year from the 1st of October, with OFGEM announcing an 80% rise in the price cap. Whilst the current cap of £1,971 was always likely to increase, the tangible figures that have been touted this morning will only increase calls for the UK government to intervene. As a result millions of households face an uncertain winter and with severe cracks appearing in the housing market ‘bubble’, whoever comes in as de facto Prime Minister will have their work cut out.

 

The US Dollar has been the chief benefactor of the current economic downturn in both the UK and Europe. The greenback touched a fresh 20 year high against the single currency this week, whilst also trading well above its 12-month average against GBP. The Dollar also benefits from “safe haven” status, i.e. when their is global uncertainty it is seen as a safe place for large scale investors to place their funds, thus bringing further strength to the currency.

 

In Europe ongoing energy supply risks as a result of the Ukraine situation, are causing a whole raft of economic problems, which is weighing the Euro down, but solidarity within the EU with regard to strategy is at least providing the Euro some support. In the UK, the lack of a PM has given exactly the opposite to support, and while there have been continued calls for the Bank of England to step in, with Governor Andrew Bailey expected to give an update on the central banks current monetary policy and forecast at their next meeting in September, what is really needed to help the Pound is a confirmed government, with a plan.

 

For anyone with an upcoming requirement, make sure to stay in close contact with your currency consultant, to be kept informed of what is happening and the options we have to help you navigate a volatile market.