Pound Falters As BoE Signals End Of Hikes

By Simon Eastman

Yesterday we saw sterling initially drop off across the board as Andrew Bailey, the Bank of England chief, hinted during a speech that the current interest rate hike cycle may be over.

Bailey suggested that after 10 successive increases to the base rate, since December 2021, we could now have seen the peak. Music to those struggling with the ever-increasing cost of borrowing but less so for those with savings and those looking to exchange currency, as higher interest rates, generally mean a stronger currency as investors stockpile said currency to gain higher returns as the rates increase.

The fall in the Pound was short lived though as we saw a bounce back as midday drew close and another drop as the US market opened, before finishing off the trading day stronger, nearly a full cent up against the US Dollar and testing the upside resistance ceiling against the euro. The up and down, could well be down to the fact that despite rate hikes generally being a good thing for a currency, with the huge borrowing levels the UK finds itself under since the pandemic, the markets have been cautious as to the effect higher rates would have on helping us avoid recession given our debt repayments were also spiralling up. So, the pause in hikes could be welcome relief and the upside of sterling reflects that.

Apart from the speeches, there were no data releases of note, which is repeated today, with only the Swiss quarterly bulletin at lunchtime to digest and some US homes sales data. With that in mind, we could see another rangebound day on the markets. For those with an upcoming requirement, it may be worth speaking to one of the team about a Limit Order, which is an intention to buy when a certain rate becomes achievable. This is automatic, so worth putting in to try and get your currency should the rates peak up over the course of the day. Speak with one of the team about a realistic peak price given the current rangebound trading and consider looking at booking a tranche of your requirement on a Limit Order.