Sterling continues to be boosted by high inflation

By Lauren Buckner

As markets open this morning Sterling continues its recent run of success against the Euro, sitting at fresh years highs! This buying opportunity is a result of last week’s higher than expected inflation data which seems to continue to give the Pound a boost in the right direction for clients needing to purchase the single currency.

Andrew Bailey, the governor of the Bank of England, was once again forced to concede that the banks predictions of an 8.3% figure on last week’s release was once again off the mark as the release shows inflation at 8.7% in the UK. A significant drop in inflation had been expected due to fast falling energy costs however, factoring this out we still see ‘core’ inflation increasing from the month before as food price rises in particular remain close to a 45 year high. Despite the positive news for consumers (seeing a drop below 10pc for the first time in 9 months) missing the expected level once again ramps up significant pressure on the Bank of England to continue to raise interest rates, in fact traders in future markets now predict that interest rates in the UK will peak at 5.3% before the end of the year – which in turn is boosting demand for the Pound.  Market expectations of a further interest rate rise in June continue to increase. UK inflation levels now sit significantly higher than most other Western countries.

Against the backdrop of some continued uncertainty the US Dollar has started to strengthen as some traders move their funds in the US Dollar as the traditional ‘flight to safety.’ This has seen the Pound retreat from 12 month highs and steadily move lower. With the US government continuing to push forward on plans to tackle record levels of debt (approaching a litigated debt ceiling at pace) by 1st June deadline it’s clear that the second half of 2023 will bring more uncertainty to currency markets. Budgeting currency rates and sticking to them has never been more important! Please call the team today to discuss how to protect your budget when purchasing your property abroad!