By Michael Jacobsen
Over the last week, we have seen the Pound come under pressure from both the US Dollar and the Euro and as a result, buying rates against both have dropped off. While this has made buying a property abroad slightly more expensive for UK buyers using Sterling, it is actually good news for any of our clients currently selling an overseas property, as a stronger Euro means you will get significantly more Pounds back when you repatriate your funds home.
So, what is driving this decline in Sterling rates? It essentially began midweek when we saw an uptick in UK unemployment levels to their highest rate in years. This was quickly followed by a lower than expected inflation reading. Despite UK inflation rising, it didn’t tick up as much as the markets had priced in. Combined with the Bank of England’s unchanged vote split to hold interest rates steady, this saw the Pound slip particularly against the Euro, with Sterling losing notable ground in the following day’s trading. This Euro strength was further boosted yesterday by German business confidence jumping to a multi-year high, showing surprising economic resilience across the Eurozone.
The US Dollar has strengthened across the board, gaining ground against both the Pound and the Euro. This push was driven by the Federal Reserve’s decision to raise US interest rates, alongside ongoing global military tensions and rising oil prices. Adding a massive wildcard to this mix over the past 24 hours is the high-stakes summit in Washington between US President Donald Trump and Chinese Leader Xi Jinping. While this might seem far away from a European property purchase, any sudden trade friction or cooperation between these two superpowers sends immediate shockwaves through global markets, heavily influencing the US Dollar and keeping the Pound on the back foot.
As the markets prepare to close for the weekend, today is expected to be a relatively quiet session for data, meaning the financial world will spend the day reacting to the final headlines out of that US-China summit. However, looking ahead to next week, the three major currencies will go head to head with a much busier schedule. We have Monday’s UK shop price inflation data, followed mid-week by Eurozone consumer inflation updates and key manufacturing and services data from the UK, Europe and the US on Wednesday. Thursday brings Australian unemployment data and the week closes out next Friday with the major US jobs report, durable goods orders and US consumer sentiment indicators. With the Pound on the back foot, it will be a close watch as to whether it can show any recovery or whether its slow slide down will continue. Any clients with an upcoming requirement or funds waiting to come back to the UK would be encouraged to speak with one of our specialist currency consultants sooner rather than later to help remove risk in these uncertain times and help make your money go further.