Pound suffers from Plan B restrictions

By Matthew Boyle

In the last week we have seen the Pound suffer – dropping around 2 cents against EUR and to a year-long low against USD. The announcement and implementation of Plan B has not helped Sterling and likely now means any Bank of England intervention or change UK interest rates will be held until early next year. The interest rate hike was one of the few positive things for GBP in the short term and the largest factor in providing it with any short term strength. Little surprise then we have seen rates start to drop. This delay in a hike has also meant the UK and BoE has missed getting a head start on the ECB who also look likely to raise rates in the New Year.

So, for the time being then, sadly it seems Sterling has little to go off to help push GBP rates up.

Plan B should be of concern to any GBP>EUR buyers not only as it has resulted in a push back of a hike, but it signals an increasing impact of Covid once again which will start to slowly chip away at economic activity in the UK.

And as the cold weather continues, the impact and transmission of Covid cases is sadly only like to increase.

Add to this that for months now we have been warned of supply chain issues which are yet to come to fruition. But given the lengthy warnings we have had and now the implementation of Plan B it seems this is just a mater of time.

So, with GBP losing the head start for monetary policy change against the ECB and the Dollar and FED looking strong to alter rates next year, it looks like a rough time is ahead for Sterling.

If you add to this supply chain problems the gears of the economy could be severely tested and with it exchange rates. And whilst we may see an improvement early next year, those EUR and USD buyers who are not doing so now may have to weather things getting a lot worse before and indeed if they get better.

So, speak to your broker today for some friendly guidance on how we can help you reduce potential risk for your upcoming transfers.