By Luke Dyson
Over the last week we have seen a significant amount of currency movement, with pound sterling taking a hit against the euro and dollar. Prior to this drop in the rates GBP/EUR and GBP/USD were particularly stable over the last few months and well established in a multiple cent range bound market. Even among the Ukraine Russia situation we rarely saw a trending market in either direction mainly due to the amount of uncertainty at play and continuous changes in terms of update from Ukraine and Russia.
On Thursday last week sterling lost its footing following the Bank of England interest rate decision. With 8 out of 9 voting for a rate hike the market suddenly dropped and so creating a downward trend for sterling.
The interest rate was hiked by 0.25% now making the base rate a solid 1%. This normally would have boosted the strength of the pound, however it was stated swiftly after the announcement that “the Bank of England in delivering its fourth consecutive rate hike, did so while while warning of higher inflation and weaker growth”, triggering a negative market response for sterling across the board for major pairs.
Sterling as of last week now being the worst performing G10 currency, it now leaves the door open for further losses as sterling euro and sterling dollar have broken out of their multiple month range bound market but also the key support levels keeping the rates at bay.
If you are looking to buy currency in the coming weeks remember with current rates, that although the market has taken a drop the potential for the market to drop further is now fully on the cards. Please get in touch with your currency consultant today to see what we can do to take advantage of this movement if you are buying sterling but also limit your risk and get a strategy in place for selling sterling.