By Matthew Boyle
With conflict ongoing in the Middle East and oil and gas prices surging as a result, the Pound has gained ground against both the greenback and single currency. Rising gas and oil prices have meant markets expectations of a Bank of England rate cut in the near term have greatly reduced, as the impact of higher inflation means the BoE are now more likely to hold. Given the BoE was almost certainly set to reduce Interest rates this month, the shift in market sentiment has seen the Pound strengthen considerably with GBP>EUR rates close to a 9-month high. The Pound’s movement against the USD has been slightly different with the Dollar initially gaining ground against the Pound, due to its safe-haven status, but, following Trump’s comments late on Monday that the war would be over soon, the Dollar weakened off allowing the Pound to regain around a cent and a half of previously lost ground. The Euro also reclaimed some ground, stealing a cent back against the greenback after having lost over four cents in the last month alone.
With news outlets reporting Iran are beginning to run low on ballistic weapons and Trump stating the US will begin to ramp up military intervention in Iran should oil supplies continue to be disrupted, bets on oil and gas prices coming down will increase which may see the USD slide further. However, the conflict is far from over and the impact on rising prices is yet to have filtered through to inflation figures or the central bank policy towards interest rates. Some analysts suggest because of the Middle East conflict, current market conditions lend towards the Bank of England in fact hiking rates again which certainly offers some support for Sterling exchange rates. However, a truce or end to the conflict, which would see oil and gas prices normalise again, would see the brakes off again for a BoE cut and with it the return of GBP weakness.
GBP>EUR buyers may want to take advantage of rates currently close to a 9-month high as these could be short-lived. Sellers may want to be cautious in waiting as the ongoing conflict and potential resulting shift in the Bank of England’s stance could see the Pound continue to push, worsening Euro selling rates.
Whether you are buying or selling and regardless of your risk appetite we offer several ways in which you can secure currency to help remove uncertainty, avoid risk, and help make your money go further. Speak to your Currency consultant today for some friendly and professional guidance.
Wednesday
12.30 USD Inflation data
03.10 EUR ECB Schnabel speech
Thursday
09.30 GBP BoE Governor Bailey speech
12.30 USD US jobless claims
Friday
07.00 GBP UK GDP
07.00 GBP UK industrial production