Rishi to the Rescue?

By Luke Dyson

Following on from last week we have seen a relatively stable market across the board for GBP/EUR and GBP/USD. With Sterling Euro still trading within its multiple month rangebound market.

Over the next few weeks we could see some positivity for sterling against the dollar and euro as a result of Chancellor Rishi Sunak’s £15 billion cash give away to boost UK consumer confidence.

It was announced the extra spending would be offered to households struggling from the current pressures of the cost of living due to the currently rapidly rising inflation levels. This boost is believed to improve UK GDP growth by up to 0.3% over the next few weeks and significantly lowers the risk of the UK falling into a recession.

The £15 billion is broken into 4 categories and will be distributed across the UK in 10 groups, dependent on your percentage earnings in comparison to average UK salary depends how much of the following you will receive.

  • One off Payment of £150 for disability benefit recipients
  • £200 additional Payment to all households with electricity meter
  • One-off top up over winter of £300 for fuel payments.
  • One-off welfare payment of £650 for households on means-tested basis

With the deposit of £650 into 8.4 million house holds this is set to raise inflation rates, however Sunak has stated this slight increase will remain manageable. This is on the basis it puts more pressure onto the Bank of England too raise interest rates from the current 1% to the realms of a 3% target.

Although the cash boost into the UK is very positive for the people that live here and we will see a potential rise in GDP and interest rates as a result of growing inflation rates. This is all usually positive for sterling and could boost the pound further in the right circumstances. However the ever rapidly growing inflation which will continue to grow over the next few weeks as a result of this announcement will continue to put a significant amount of strain on households across the UK. Now leaving the door open for massive amounts of uncertainty in terms of the UK population being able to keep up without falling into a recession and damaging the pound further.

If you have an up and coming currency requirement, even though what is about to happen is potentially positive for sterling there is no guarantee that this is the case. Last time we saw interest rates hiked GBP/EUR dropped further. Please get in touch with your currency consultant today to limit your currency exposure in this uncertain time.

News Releases

31-05-22 – 08:55 EUR – German unemployment figures.

– 10:00 EUR – Eurozone CPI

01-06-22 – 15:00 USD – US manufacturing