By Grace Smyth
This week’s big market movers, the Bank of England and European Central Bank interest rate decisions were released yesterday, with the results causing some real shifts on exchange rates.
Thursday morning saw GBP-EUR rates gradually fall in anticipation of the bank outcomes, with speculation of a 25-50 basis point rise. The Bank of England raised the key rate by half a percentage point from 3.5% to 4% (the highest in 14 years) in a bid to curb rising inflation. Exchange rates spiked up 30 pips as a knee jerk reaction to the news, however, did not last very long at all as they dropped back almost instantly by over half a cent, pushing rates back to the lowest they have been since September. While they forecast inflation dropping to just under 4% by the end of the year, the bank’s Governor Bailey quoted “it is too early to declare victory against the fight against inflation” so we can expect more of the same throughout this year ahead. The bank had noted that it could further tighten the policy if needed, so they continue to remain cautious about the UK’s economy. With unresolved Brexit issues, strikes seemingly popping up all over the place and cost of living crisis still in tow, and the UK set to enter a recession (albeit shorter and less severe than previously expected) there is still a lot for the UK economy to contend with over the year ahead.
The ECB then followed suit with a hike of 50 basis points as expected with intentions to raise rates by a further 50 basis points at the next monetary policy meeting in March, with intentions to monitor further rate decisions on a data-dependant, meeting-by-meeting approach to lead them towards their 2% inflation target. Following the result GBP-EUR rates picked back up just shy of half a cent.
So, not the best outcome for those with Sterling in hand looking to exchange as there was no real positive movement in the exchange rates, but perhaps welcomed by those looking to convert and bring funds back into the UK.
The US also posted a mix bag of data yesterday with weekly Initial Jobless Claims declining to 183K versus the 200K expected, while (MoM) Factory Orders came in at 1.8% below the forecasted 2.2% in December. The results had put some pressure on the USD closing out the trading day a cent lower than opening.
Today the focus moves across the pond with the US posting a range of data releases between the hours of 1:10pm-3pm, including Average Earnings, Unemployment, Nonfarm Payrolls and ISM Services PMI.
This morning we have seen markets open lower than yesterday’s close, it could be markets just digesting yesterday’s data or could be the beginning of a new trading range. If you have an upcoming transfer to make then do reach out and talk to our team about the various options we provide to help you secure your funds. Our ‘stop loss’ and ‘limit’ orders could be the answer to help you lock in at your preferred rate or a worst case rate, to help you avoid losing out on your dream property should the markets go against you.