Inflation keeps the Pound strong

By Luke Dyson

Just over half way into the first month of 2024 and sterling is performing particularly well. Against the Euro we have seen some good strength with the market now trading right at the top of the range, just below an 18-month high going back to August 2022.

The recent boost into the new year for sterling has mainly been driven by inflation figures for the UK being released in the middle of last week. With a slight rise of inflation for year on year now at 4.0%, this put some volatility back into a relatively flat market.

As a result, investors now believe interest rates won’t start to be cut until June, a slight delay from the initial thoughts of May. This then has driven sterling higher as interest rates are likely to be higher for longer, but mainly due to the fact this was unexpected and not already priced into the market.

With the Bank of England’s target for inflation being 2%, this is now believed to be on the cards by April. But until we get to this point it is believed that interest rates will remain the same.

For the week ahead, we have a relatively quiet one regarding data coming out. However if you have an up and coming currency requirement please get in touch with A Place in the Sun Currency if you are considering taking advantage of the current rates. At present, GBP is particularly strong making it a potentially excellent buying opportunity. This strength could be short lived so please be careful if waiting for higher, in case you miss the boat.

News out this week

23rd Jan – 09:00 ECB Bank lending survey

24th Jan – 09:30 GBP – S&P Global composite PMI

– 14:45 BOC interest rate decision

25th Jan – 13:15 ECB monetary policy

– 13:30 USD GDP