By Luke Dyson
As a new month begins, last month we saw sterling strengthen significantly against the euro, all off the back of Kwasi Kwarteng being sacked and replaced by Jeremy Hunt who reversed his budget, and Liz Truss’s subsequent resignation.
With this sterling strength we have now seen a two month high being reached, which is extremely positive given the UK’s current financial situation regarding inflation and government debt.
Expected tomorrow is the Bank of England interest rate announcement, it is predicted the BoE will hike rates by 0.75% to a 3% base rate, which would be the largest hike by the BoE in recent decades. 4% is potentially in the picture by the new year.
Although a typical interest rate hike is positive for sterling, the last few times it’s been hiked the markets haven’t reacted this way, due to government debt becoming increasingly more costly, putting the UK under more financial strain.
Yesterday the Bank of England also announced they will be selling bonds from its £838 billion pound stock pile, with £750 million of Gilts being sold already with a plan to bring this number up to £6 billion across November and December this year.
With where sterling is at present against the euro it is a buying opportunity given where the market has been in the last four or five weeks, so if you have an up and coming currency requirement please consider taking advantage of these current rates as these could be drastically different come the end of the week after the Bank of England has announced its interest rate hike. We are now 10 cents higher for exchanging sterling to euro from the previous low in September.
Please get in touch with your currency consultant today to discuss what strategies we can put in place to limit your currency exposure but also make the most out of the current markets.