Strength to strength

By Luke Dyson

What a strong start to 2022 for Pound sterling, with new highs and key resistance levels being broken, which was initially keeping sterling-euro at bay.

For the week to date we have seen sterling perform well and break out above the multiple week rangebound market, generating new highs following a higher inflation rate than expected. The original forecast was 5.2% with the actual figures coming in at 5.4%, now piling pressure onto the Bank of England to increase interest rates to target the rapidly growing inflation rate.

It is forecasted that the BOE will raise interest rates February as the current inflation rate is already over 2% higher than predicted for this time of year.

Although this news has boosted the strength of sterling as interest rate hikes begin to get priced in, it is not all plain sailing for sterling just yet. With current investigations taking place following a chain of (parties) at number ten, prime minister Boris Johnson has been under fire and having to tread lightly to ensure he still has his job and avoids a forced resignation. If Boris was to step down as Prime Minister this could be devastating for sterling strength by generating a huge amount of uncertainty moving forward, which currency markets, especially sterling, do not react well to.

If you have an up-and-coming currency transfer, consider taking advantage of the current highs these could be very short lived given the on going Boris situation, as more and more information is drip fed into the market, is it worth waiting to take the risk for a potentially small short term gain with a larger downside potential still at bay?