How are interest rates driving the Pound?

By Luke Dyson

Following on from last week, we saw sterling make some strong gains against the Euro and Dollar. These gains were mainly due to the Bank of England’s interest rate decision. This resulted in the current interest rate of 5.25% remaining the same.

This decision to keep the rates the same didn’t directly impact the market, however it was the fact that it was made clear there will be no rate cuts in the near future which gives the Pound some strength. In fact, further rate hikes were left on the table, as quoted by Governor Andrew Bailey: “I can’t say definitively that interest rates have peaked”.

The committee was split with 6 members voting to ‘hold’ and 3 having voted for rates to rise to 5.5%.

In terms of where the market is at present for both GBP/EUR and GBP/USD they are both excellent buying opportunities given where the market has been the last few months.

Although there is a chance intertest rates will get hiked higher in the near future, this does not guarantee that this will necessarily happen, or even if it does that sterling will strengthen further.

If you have an up and coming currency requirement please get in touch with your currency consultant to discuss your options, and not let the recent increase potentially trick you into holding out for the chance of better.

Data releases this week

DEC 20th  GBP CPI – Consumer price index

DEC 21st  USD GDP Annual


GBP  Retail sales