By Lauren Buckner
Nobody appears to have told the UK government that it is not quite panto season. As Liz Truss, the awkward and disliked villain finally fell prey to her audiences loud boos, Boris Johnson, perhaps playing the ‘loveable’ court Jester starts warming up on the side lines ready to save the day. Kier Starmer and Nicola Sturgeon undulate in cries of “he’s behind you” or more accurately “ a general election now please.” An analogy sadly fitting of the current political climate in the UK it’s a wonder that Sterling has not once again collapsed. In fact the Pound remains fairly stable in comparison to recent weeks against both the Euro and the US Dollar suggesting that this has been expected by the markets.
Truss only held her Premiership for 44 days (a new record) but caused significant volatility in currency markets after her then Chancellor Kwasi Kwarteng released his ‘mini-budget’ and deep rooted concerns around the level of government borrowing on the tail winds of pandemic spending caused chaos amongst financial markets and crashed the Pound to record lows against the US Dollar. Truss has now set the challenge for a new PM to be found within the next week.
As the Conservative government in the UK indulge in further chaos it remains a fact that the cost of living continues to bite as inflation figures this week show a damning picture for the UK consumer. Registering over 10pc and at a hefty 14pc on food bills the government’s short term focus has to be on gathering support amongst its own MPs and launching a credible package of support to the public. With the Bank of England once again under pressure to raise interest rates faster and further than previous expectations (expected rate rise of 75 or 100 basis points in two weeks time) in an attempt to control inflation the government is under pressure to support the UK economy and prevent an economic downturn, all of which is putting pressure on the Pound.
Over in Europe talks continue amongst the bloc in an attempt to agree a cap on gas prices as spiralling energy costs. So far, Germany remain resistant to the idea but following Russia’s invasion of Ukraine and the EU’s reliance on Russian energy supplies, the cost of energy is seriously impacting the capacity for economic growth. This in part explains the reason why the Euro has failed to make significant gains versus the Pound despite the political landscape and the recent volatility that we have seen.
What happens next at this stage really is anyone’s guess. In times of significant uncertainty and market volatility, securing your costs should be at the forefront of your mind when looking at currency transfers. Please make contact A Place in the Sun Currency if you would like to discuss your requirements in detail.