By Matthew Vassallo
Sterling’s impressive run over the festive period has shown no signs of an imminent retraction, with the Pound solidifying its position against both the EUR & USD during the first two trading weeks of 2022.
Whilst the increase in GBP’s value has been welcomed by those clients looking at foreign property & investment opportunities, there is a still an undertone of surprise amongst investors as to the level of the current upturn. This is even more poignant when you consider the relative caution shown by the markets over prolonged periods during Q4 of last year. Those clients holding GBP positions and hoping for a continuation of this upward trend, may want to consider the historical similarities between the current highs and the subsequent market reaction.
This is the not the first time the Pound has flirted with stardom, only to wet the whistle of those who remained committed to holding firm in the hope of reaching the lofty heights north of 1.20 against the EUR and trading closer to the key benchmark of 1.40 against the USD.
This point of view is made not to dampen the hopes and expectations of those looking to once gains achieve levels similar to this, as there is of no way to predict exactly how the market’s reaction to events will unfold.
It must be mentioned though, that with Boris Johnson coming under increasing pressure not only in parliament but now within his own party, the whispers of a vote of no confidence are growing in volume.
Whilst there will be those that point towards today’s UK inflation figures, which are set to hit a decade high at 5.2%, as a reason the Bank of England will be forced to raise interest rates again next month, is this assumption not at least to some extent factored into GBP’s current market value?
To me the Pound’s recent ascent is like a helium balloon that has made its way highest ceiling in your house, only to be met by uncompromising resistance. Common sense points to the overriding likelihood that from here it is inevitable, that despite its best efforts, the only way is down.
Unless of course you are willing to gamble on that one rogue balloon, that somehow finds its way through that one open window where the sky is the limit.