Sterling on the move

By Luke Dyson

For the week to date we have seen a huge amount of volatility for Sterling-Euro and Sterling-Dollar, with multiple cents being gained over a couple of days.

GBP/EUR has now broken up and above its multiple-week range-bound market, now making it an excellent buying opportunity, However for GBP/USD we are still trading within the current weekly range as the dollar is performing particularly well at present. But again an opportunity to be had if looking to buy dollars compared to the end of last week.

Sterling’s gains over the last few days have been down to a couple of different factors, it is believed there will be another interest rate hike by the bank of England on the 4th of August by 0.5% , which by the looks of the current market has been priced in ahead of time. However we could potentially see further gains from this. It has also been stated that the BoE’s base rate could continue to rise over the course of 2022 to a level of 3%, which would drastically impact the currently high inflation rates but also would significantly reduce consumer spending power, and result in a potential recession. This could result in a sharp fall for sterling strength if it was the case.

We have seen the euro drop significantly against the pound and dollar as surging gas prices across Europe are now potentially putting the euro zone at risk of falling into a recession in the months to come. The Nord Stream gas pipeline line is now running at 20% capacity as a move taken by Russia in an attempt to have its sanctions removed, with threats of completely shutting off the pipeline if sanctions have not been removed in time, now making the price for European natural gas hit a all time high of $150/MWh.

With where sterling is at present it is an excellent buying opportunity for euros and just below the high for the last few years, if you are looking at buying currency in the next few months do consider taking advantage of the current rates, these could be significantly different in the weeks to come as the UK begins to decline in consumer spending and risks of a recession ahead. Although there are some positives to be had as the euro weakens its not a guarantee that sterling will come out on top – is it worth the risk given how well sterling is performing at present?

Please get in touch with your currency consultant at A Place in the Sun Currency today to discuss strategies, to see how we can limit your currency exposure.