By Tom Arnold
Over the course of the last couple of weeks the Pound has been firmly on the back foot, primarily caused by interest rate differentials with the other major currencies. Both the European Central Bank and the US Federal Reserve have raised their benchmark interest rates in that period, while the Bank of England held UK interest rates. The BoE’s Monetary Policy Committee didn’t even change their previous voting stance, which was seen as a clear sign that a rise in rates is not on the cards in the short term. Interest rates are important because yield-seeking investors will move their huge portfolios around to the highest yielding economic zones, and when they do so, they strengthen the local currency. So, if the Uk falls behind other countries in interest rate expectations, then it will be less attractive to those investors, which weakens the Pound.
However, the worm has turned somewhat in the last couple of days, with firstly UK PM Burnham delivering what was seen as a very positive speech at the Labour party conference yesterday, and then UK GDP – economic growth – coming out this morning higher than expectations, with a 0.5% quarterly figure and 1.4% annual figure. Despite the doom and gloom merchants on the other side of the political spectrum in the Uk, economic data continues to confound, with positive numbers seen in many areas, not least of all these ongoing growth numbers. Clearly 0.5% growth is not something to get too excited about, but against the supposed backdrop of “broken-Britain” it provides some much-needed positivity.
It remains to be seen whether PM Burham will be able to deliver any improvements from Number 10, over what we have been experiencing in recent years, but at least a positive tone and some different ideas is a starting point we can all hope leads to pastures new.
In exchange rate terms the Pound is now three quarters of a cent higher than it was two days ago, which equates to about a £1100 saving on a €200,000 property. Helping you to take advantage of such improvements in the market is part of the award-winning service we offer here at A Place in the Sun Currency. Your personal currency consultant can help guide you through the options available to help you secure your rate in advance of your requirement when the market spikes up.