By Tom Arnold
This week has been something of a reflection for the markets with regard to the Pound, with the budget delivered last week, and a few days now for the markets to digest the announcements and process the overall impacts. Add to that the accusations swirling around whether Chancellor Rachel Reeves has misled the public, the House and the country at large and there has been a lot to consider.
As we reach the end of the week, the overall reaction seems to have been, in maybe a surprise to everyone, a positive one. The Pound is around half a cent up against the Euro, which to some degree has confounded analysts. The UK is expecting an interest rate cut from the Bank of England in the next couple of weeks, which should be Sterling negative. The Eurozone is now widely expected to have finished its own interest rate cuts, which should be Euro positive. The US Dollar is weakening ahead of its own likely interest rate cut, which should also be Euro positive. And yet here we find ourselves with a strong Pound and seemingly weaker Euro…
The Pound is also around two cents up against the US Dollar, largely down to a weaker US Dollar, which, as already mentioned, is under pressure due to likely Federal Reserve interest rate cuts at their next meeting. Add to this weaker than expected US labour data this week, coupled with a likely upcoming change at the helm of the Fed to a Trump installed “lower interest rates” candidate and the outlook for the Dollar is rather negative.
With the Pound enjoying something of a resurgence and the backing for it tenuous at best, this may well be a good opportunity to secure your upcoming Euro requirements before the possibility of a market rebound. The realities of a BoE interest rate cut, coupled with a ECB hold could well cause the markets to correct back to the rates we have seen over the past weeks. Get in touch with your account manager today to discuss the options available to you to take advantage of this spike in the rates.