By Simon Eastman
This week we have seen the pound continue to fare well against all major currencies, with some multi-year highs hitting against the euro and US dollar.
The pound rally started last week when the Bank of England held interest rates, favouring a more cautious approach than the Fed or European Central Bank, who have both cut rates recently. Regular readers will know, an interest rate going down, is bad for a currency as it means investors sell off their holding to buy up currencies with a higher return (interest rate), which in turn weakens the currency being sold and strengthens the one being bought.
With much speculation surrounding the Bank and whether they would be cutting interest rates up to the meeting last week, plus the 50 point cut by the Federal Reserve in the US the week before, the pound was traded cautiously, but when the rates were held the rally started and has continued into this week giving those with sterling in hand more buying power, against whatever the currency may be. Great news and something that could be wise to take advantage of, as we know the currency markets are fickle and can change in a flash.
The pound was helped against the euro yesterday particularly due to a raft of poor German IFO data surrounding business climate and future expectations. Following in the afternoon’s trade, the US releases, which included consumer sentiment data, also missed the expectations, so with nothing from the UK but positive sentiment from last week, the pound is holding firm.
The month is coming to an end and the main releases of note are done with, so there is little for traders to go off other than market sentiment and speculation. Today we have a speech by MPC member Greene and then nothing until the US markets open after lunch and they release new homes and mortgage data before Fed member Kugler speaks this evening.
Although we cannot advise, the clear temptation would be to make hay while the sterling sun shines, taking advantage of the excellent rates we have right now. You can spot buy if you have funds available or forward buy if you don’t, or if you are gaining a decent interest rate on your savings and want the best of both worlds, you can lock in the rate with just a small downpayment.
Whatever your requirement or situation, give one of the team at A Place in the Sun Currency a call today for some friendly guidance and to discuss the different contract options available to help make your money go further.