By Matthew Boyle
This week has seen the Pound make slow but consistent gains across the board as the Bank of England reinforced their position regarding interest rates. It was widely expected that the BoE would cut the interest rate by up to 80 basis points in 2024 with the first cut happening as soon as May with inflation dropping faster than expected, shown in October’s inflation release.
However, on Monday in a scheduled meeting with the Treasury select committee, BoE Governor Andrew Bailey stated there was a strong case for rates to be maintained at 5.25% for an extended period. This was further reinforced in a later speech to the National Farmers Union when he said it was too early to consider rate cuts as despite the drop in the headline inflation rate some of the components that make up the figure remained high as did the impact of wage growth inflation.
With Bailey’s position clearly pointing away from any cuts this helped breath life into UK yield markets and the Pound after it had recently tested 7-month lows. Whilst Bailey dismissed rate cuts, several MPC members showed support, and some were in fact a lot more aggressive with their stance, so pushing strength for rates when selling GBP. MPC member Mann suggested policy would need to remain particularly tight, MPC member Haskell echoed this and said there would be no cuts any time soon, whilst MPC member Ramsden went further and said he would not rule out further rate hikes. The result meant expectations for cuts next year subsided and as a result the Pound has seen an uptick across the board.
GBP>USD rates are also up as the Bank of America seemed to lend their own support to Sterling stating UK interest rates would remain elevated through much of 2024.
With the Pound seeing a nice uptick those with upcoming requirements should speak to A Place in the Sun Currency today as they may want to consider taking advantage. With markets so sensitive, inflation driving exchange rates and the prospect of an appalling Christmas period for UK retail ahead, as the cost-of-living crisis plays on, downside risk for GBP still remains high.
Feel free to call our team for some friendly guidance on how we can help you remove this risk and prevent the cost of your overseas purchase or currency transfer increasing.