By James Caley
This week has been notable for sterling. Although the UK’s inflation figures did not meet the forecasted 1.9%, the data released still caused additional strength to the pound, pushing GBP/EUR to levels not seen since July 2022 and GBP/USD to another peak, reaching its highest level since July 2023.
However, these peaks were short-lived. By the close of play, sterling dropped almost a cent against the Dollar and half a cent against the Euro.
Yesterday’s ECB interest rate announcement brought no surprises and briefly weakened the Euro against the Pound.
This morning we saw worse than expected retail sales figures for the UK, but at the time of writing this doesn’t appear to have had a major effect on the Pound. The rest of the day is pretty quiet in terms of UK data but it could be worth keeping an eye on the Federal Reservespeeches towards the end of the UKs trading day as there is always potential for movement after these.
Despite minor retreats against both currencies yesterday, those planning to purchase Euros or Dollars in the immediate future are in an excellent position to do so. The key question remains: how long will the UK maintain this economic strength, and when will these rates revert to the levels seen over the past 1–2 years?
Interest rates are a crucial factor to monitor. The markets are anticipating a cut to UK interest rates in August, which would likely weaken the Pound against both Euro and Dollar. However, stubborn UK service sector inflation, currently at 5.7%, has cast doubt on whether the MPC will proceed with the anticipated 0.25% cut.
Economists are increasingly confident that the Fed will cut interest rates in September, which seems to have already been priced into the markets. When this happens, it may cause further weakness for the Dollar, but the impact could be mitigated if the UK adjusts its rates beforehand.
As always, the currency markets are dynamic. While conditions are currently favourable for those buying euros or dollars, they can change rapidly. If you have an imminent requirement for currency, you are in a strong position. For longer-term needs, it is worth speaking to your A Place in the Sun Currency to consider securing at today’s favourable rates. If you need to sell foreign currency, timing your trade carefully could help ensure the best possible rate in a challenging market.
Regardless of your requirements, contact us for expert guidance and support.