Pound gains but recovery could be short-lived

By Matthew Boyle

GBP was the best performing of the major currencies yesterday as December started and the run to Christmas and the New Year begins. Aided by a midweek speech from US Fed Reserve Chair Jerome Powell where comments strengthened the likelihood that we will see a slowdown in the US rate-hiking cycle. Whilst the Pound seemed to benefit from this yesterday, longer term this might reverse and add pressure on GBP. With UK borrowing levels so high alongside it being a net importer of energy and a wide range of goods, the Pound is extremely sensitive to global investor flows as these are all brokered in US Dollars.

Against the Euro the Pound is performing well but with sentiment largely driving GBP/EUR again this rise could be short lived. As we get closer to the end of the year a likely slowdown in market risk could see GBP/EUR level off. Downside risk remains high due to the ongoing cost of living crisis with its impact being magnified as the cold whether sets in – homes and business having top turn the heat on will feel the financial squeeze so impacting unemployment rates, Christmas retail sales and GDP.

Despite the onset of the cold weather and many already feeling the pinch of increased living costs and interest rates, despite this no doubt some of you will have started your Christmas preparations to make sure you are set ahead of the big day and all goes to plan.

And with markets up, rates sensitive and a chance thy might drop – the same thinking would be prudent to apply should you have an upcoming currency requirement, particularly those with the big purchase of a property.

Speak to your currency consultant today to get set ahead of time and make sure your big day goes without disappointment.