Sterling Riding a High, but for How Long?

By James Caley

Sterling has demonstrated continued strength against the Euro throughout June, reaching the highest trading range we’ve range seen in nearly two years. The pressing question for economists and market watchers alike is: how long will this high last?

With polling day approaching on 4th July, inflation rates at their lowest levels since April 2021, and an interest rate reduction anticipated, changes in the market are imminent. These changes are perhaps more likely to benefit those selling Euros. Not so much for buyers of Euros, many of whom are taking advantage of the highs right now. The overall impact of the impending changes on the market remains uncertain, especially with the French election result hanging in the balance which is more likely to give further strength to the pound.

If you have an upcoming requirement for Euros, consider the possibility of a forward contract rather than taking the risk of losing out if the market declines.

The situation is slightly different for sterling against the dollar. The pair has exhibited some volatility throughout June, with a trading range of around 3 cents. USD buyers have capitalised on recent highs, but the pair has also dropped for short periods, benefiting those who are selling dollars and repatriating funds to the UK. The trend for June has been downward, and this appears likely to continue given the current political and economic conditions. However, fears of rising global inflation are unsettling investors, which could delay decisions on interest rates in the UK and, in turn, the changes we are all expecting.

Despite a slight decrease in strength against the dollar, the current rates still favour USD buyers rather than sellers. If you have an urgent requirement to sell dollars, keep a close watch for dips to secure the best rates.

GBP/CAD experienced a small correction in June after what has been a two-year high and continues to trade at some of the most favourable levels seen in two years.

GBP/NZD is trading in the middle of its 12-month range, while GBP/AUD is trading at the lower end of its 12-month range – possibly the result of higher-than-anticipated inflation in Australia.

Two significant economic data releases at the end of this week could impact some of the above pairs.

UK GDP data (Friday)

US Core Personal Consumption Expenditure (Friday)

To ensure you’re aware of both the upside and the downside of the current political and economic situation speak to one of our currency consultants who will guide you through your options.