By James Caley
Despite widespread speculation about a second interest rate cut in the UK this month, Wednesday’s inflation data of 2.2%, slightly above the forecasted 2.1%, has thrown a spanner in the works, as inflation hasn’t eased to the levels many anticipated.
While this is disappointing news for homeowners locked into high mortgage rates, it’s not unwelcome news for our clients looking to purchase property abroad. Had the interest rate cut materialised, we likely would have seen a weakening of the pound as investors sold off. Instead, with the Bank of England maintaining rates at 5% until at least November, and cuts from both the Federal Reserve (50 basis points) and the ECB in the last week, sterling has continued its rally with the pound hitting levels against both the euro and the dollar this morning that haven’t been seen in over two years.
The US faces rising unemployment and growing concerns of a recession in the short-to-mid-term, which has further boosted GBP/USD. This is excellent news for those buying in dollars, though less so for clients looking to repatriate funds back to the UK.
Looking to the end of the week, sterling could show some vulnerability if UK retail sales data underperforms. Germany’s PPI figures may also impact the recent GBP/EUR high, and we’ll be watching speeches from ECB President Lagarde and the Fed’s Harker, as they could have late-day effects on the markets