By Matthew Boyle
It has been a tough week for the pound, seeing buying rates against the Euro drop to 2.5-year lows. Following the OBR downgrading UK growth figures, sterling has come under increased pressure as it suggests a minimum of a £20billion deficit that will need to be plugged in the budget that looms large on 26th November. With Keir Starmer refusing to rule out going against the Labour election promise of no income tax hikes, it looks as if pressure may continue to mount in the coming weeks as we get closer to Rachel Reeves’ budget next month.
Today we see the release of Eurozone inflation which could be a market mover as it links to the European central bank’s policy regarding interest rate levels. Downside risk remains high for the Pound as the ECB are considered likely to cut rates in December. Should the inflation reading come in higher than expected, this could push Euro strength if an ECB hike were to be delayed.
Elsewhere, USD seems to continue a run of strength having gained around 4 cents against the pound and around 3 against the Euro in the past few weeks. Despite conflict sadly spiking again in Israel, the announcement of Trump lifting many of the imposed tariffs on China will only boost the greenback and US economy lending further strength to the Dollar.
It does seem that, unfortunately, the Pound is firmly on the back foot at present across the board. Amidst the OBR downgrade and upcoming budget, further interest rate cuts from the Bank of England loom soon or early next year, and we still must pass Christmas and important retail sales data whilst the UK battles stagnant wage growth and rising living costs. Whilst it is possible we may see a correction for Pound buying rates, given the recent sharp drop and weakness in other currencies the road ahead for the Pound looks to hold many hurdles.
Should you have an upcoming currency requirement speak to the team at A Place in the Sun Currency today. We offer a range of tools to help reduce risk, to protect the exchange rate, and you from the cost of your transfer increasing.
Get in touch to help us help you make your money go further.