By Luke Dyson
Interest rate hike
Following the interest rate hike by the bank of England last Thursday, sterling has lost its footing against the euro and dollar. The Bank of England announced a hike of 0.25% bringing the current rate up to 0.75%, which was not a shock as inflation is drastically high in the UK and a hike was expected in an attempt to combat this.
However following this typically positive news for what would boost sterling strength, the market reacted differently following the Bank’s monetary policy committee (MPC) announcing a set of cautious guidelines regarding the need for further interest rate hikes.
It was said that further interest rate hikes were needed but the market’s expectation of 2.0% by the end of the year is completely extreme, sending sterling currency pairs shooting down as large investors re-adjusted.
The ongoing Ukraine situation has made GBP/EUR volatile as daily updates effect the strength the of the euro depending on how negotiations are going or being scheduled to take place.
With the war now becoming an increasing concern it is beginning to pour more fuel onto the fire regarding the UK’s inflation issue with consumers’ purchasing power being significantly damaged for individuals and businesses, now threatening the UK’s economic health.
Energy, food and most commodities have surged massively in price since the initial invasion of Ukraine, with the Bank of England predicting inflation getting to 8% by the end of the second quarter. With this rise in inflation the BoE now forecast raising interest rates further down the line wont help as inflation will burn out by itself.
If you have an up and coming currency requirement please consider taking advantage of the current rates, although they have dipped slightly from the highs it is still an excellent buying opportunity given the current circumstances. With sterling now potentially losing its buoyancy device (rate hikes) and the ongoing war situation is it worth the risk waiting to see if the market will go further?
23-03-2022 07:00 GBP CPI
12:30 GBP Annual budget
25-03-2022 07:00 GBP Retail sales