By Paul Newfield
A tumultuous week for the FX markets has seen the Pound tumble further, amid a number of key economic data releases and political events, in a period that has seen further evidence that there is no stopping the woes of the UK.
Wednesday saw the main UK CPI inflation rate hold steady at 3.8% with food prices up significantly, the later RPI came out up slightly, causing the interest rate decision on the Thursday to be held by the BoE at 4%, still double the recognised target level of 2%. The likelihood of a rate cut is even less now as only two MPC members voted in favour of cutting, down from five at the previous vote. Ordinarily, a stronger interest rate or confidence in a non-lowering would give the pound a bit of a boost, but not in the current climate ā one in which gold prices have almost doubled in eighteen months.
The Federal Reserve interest rate decision in the US was also key in the Pound’s freefall; as the decision was to lower the rate ā remember, higher interest rates normally provide a currency with some strength, so in this case the USD weakened ā the associated caveat is that when either the USD or Euro weaken the other strengthens, and vice versa, so we saw a surge in the Euro which , in turn further hammered down the GBP-EUR rate.
Keeping with the US, and we had the second state visit of President Trump with a significant amount more pomp than received by the previous incumbent. A Ā£150bn tech trade deal was struck, even this gave the Pound no boost in the slightest.
Bond markets, world-wide, continue to struggle; we have had weak French and German industrial and production figures this morning, slightly improved retail sales figures from the UK and yet the Pound has lost another half-cent this morning, after a half-cent drop between Wednesday and Thursday.
The Pound is predicted by many analysts to fall another 3-4 cents over the coming months and, with the upcoming UK budget and all its predicted tax rises, the Pound could be in for a very rocky road indeed, should UK businesses be further impacted negatively by the perceived self-sabotage by those in Whitehall and Westminster.
Keep in touch with your assigned currency consultant, and maybe ask about our forward contracts, where we can lock in a rate for up to a year or more ahead and prevent your cost soaring for your property abroad.