By Lauren Buckner
GBP bounced across most major currencies yesterday afternoon following comments by BofE member Vieleghe who suggested that an early interest hike by the Bank of England is possible if we see a smooth transition from furlough and a resulting economic flurry. Looking forward to as soon as Q2 2022 Vieghle’s optimism for the UK recovery from Covid gave GBP a boost and saw a fresh week high in GBPEUR.
Continuing to trade within the technical 1.15-1.1750 range versus the Euro, we are beginning to see the Pound struggle with making gains above the 1.1650 mark which we are testing again this morning.
This sideways trading can often result in large swings in exchange rates when they finally break, so which way will it go?
Unfortunately this is the unknown factor as exchange rates are impossible to predict with any level of certainty. However, GBP has dominated this year so far – moving over 6 cents (at its peak) against the EUR and the US Dollar. This has been due to the incredible speed and efficiency of our vaccination programme coupled with a clear roadmap to recovery from coronavirus. On this note Northern Ireland announced yesterday that all persons over the age of 18 were now eligible for their vaccine, a fantastic achievement.
An economic recovery from a global pandemic is a Marathon and not a sprint and despite the positive year we have had so far for the Pound the risk of fatigue and therefore some weakening in GBP in the short term should not be overlooked. We are beginning to see an increase in daily case numbers, attributed to the Indian variant taking hold and although vaccines are proving successful in both slowing the spread and reducing hospital admissions it could be damaging for the Pound if we start to see local restrictions creeping in and a steep uplift in case numbers.
For our customers making that significant purchase of a holiday home/boat etc your budget could be greatly impacted if the rates were to move against you, please keep in touch with your account manager to ensure that you are up to date and informed.
Comments from the US also increased risk appetite as we saw higher US bond yields and comments from President Biden around an increase in spending which boosted market sentiment. This could be positive as we see an increase in flow to riskier assets. There is an expectation of a quiet day ahead on rates as we see the market begin to consolidate in advance of the long weekend in the UK. Please remember that we will not be in the office or able to deliver funds on some currencies now until Tuesday next week.
A fairly quiet start to the second week on the data front next week with German Unemployment data on Wednesday followed by figures from the US on Friday plus housing data for the UK. Please get in touch to discuss any upcoming requirements that you may have.