Inflation for the Pound

By Matthew Boyle

Rates to buy Euros from the Pound currently sit at a near 7 month highs. Since the beginning of this year alone Sterling has gained over 3% against the single currency. As we know, central bank intervention in the form of interest rate hikes, to combat rising inflation levels had been the primary driver of exchange rates for some time now and is predominantly the reason why GBP>EUR rates currently sit where they are at. The tough question is…what happens next?

Most believe the Bank of England is coming to and end of the hike cycle and are likely to raise rates once more later this month, with the ECB much less further into their programme having started long after. So as the Bank of England look like they are running out of GBP strengthening gas the ECB have not long fuelled up on their hiking journey.

However, data last week has changed much opinion in the market. Data from the Eurozone showed inflation is slowing and a faster rate than any expected. So, whilst inflation in the UK sits at 8.7%, dropping slower than expected, Eurozone inflation sits at 6.1% and is falling faster. With UK yields higher than expected due to high interest rates the disparity of these yields between the Pound and Euro is looking likely to continue for some time and could in fact increase. And it is these high yields which is attracting investors to the Pound and encouraging Pound strength.

Market profit taking cannot be ruled out in the short term given these gains, and of course we know how volatile and unpredictable the market has been. With rates at a near 7-month high those with a short-term EUR requirement may want to take advantage for risk of trying to gain an inch but risking losing a mile.  There is little data of note from the UK this week with Eurozone Retail sales on Tuesday and GDP on Thursday the main releases of note.

Should you have any upcoming transfers speak to your A Place in the Sun Currency consultant today for some guidance on how to get the most out of your transfer and make your money go further.

Data This Week


14.00    USD       ISM services data

23.00    GBP       BRC Retail sales


04.30    AUD       RBA Interest Rate Decision and Statement

09.00    EUR        Retail Sales

23.20    AUD       RBA Governor Lowe Speech


01.30    AUD       GDP data

06.00    GBP      Halifax House Price data

12.30    USD       Goods and services trade balance

14.00    CAD       BoC Interest Rate decision and statement


09.00    EUR        GDP data

12.30    GBP        Jobless claims data


01.30    CNY        Inflation Data

12.30    CAD       Unemployment data