By Luke Dyson
Following on from last week’s trading, we had a relatively busy one with multiple economic data releases. The main one being the Bank of England interest rate decision last Thursday. We saw all 9 Votes come in for a rate cut, resulting in a 0.25% cut from 4.75% to the current 4.5%.
Prior to this announcement, we saw Sterling-Euro start to drop off as this rate cut expectation began to get priced in which was then confirmed by the BOE later on.
Following the rate cut and market drop , Governor Bailey announced that any further rate cuts may be off the cards as it is likely inflation will shoot up the end of the year.
However hard to be predicted at this stage, although very positive for sterling if interest rates were to be held or hiked in the future, and so resulted in Sterling recovering against the euro to pre interest rate decision levels.
For the week ahead we have a relatively quieter week for sterling data, with GDP out on Thursday the 13th. For the eurozone we also have GDP this week on the 14th of Feb.
Sterling to Dollar we have seen a very volatile last few weeks with a continuation of the downward trend. Initially being started by Trump being voted in on the 5th November 2024, which seems to still be driving the dollar’s strength against the pound. Now GBP is trading towards the lowest point since Oct 2023.
We have a busy week data-wise for the US Dollar, with 12th Feb’s CPI followed by retail sales on the 14th.
Given where the rates are at present for sterling to euro, it could be seen as an excellent buying opportunity as the rates are still holding right near the top of the recent range. This could change positively or negatively in the near future, however is it worth the risk given you’re able to buy just below the best in the last 6 years?
Regarding GBP to Dollar its a slightly different situation as the market is currently heavily declining and has been for while now. The strategy could be to limit your risk as much as possible and so potentially is worth buying your dollars sooner rather than later before it potentially costs any more again.
Obviously anything can happen which can significantly change the market moving forward, but no one knows this so we have to use the data we have.
Please get in touch with your currency consultant to discuss this further and get a strategy in place to take advantage of the current market conditions.