By Ashley Finill
This week has been a challenging one for the pound, as UK politics has started to dictate its movement in the current market, with uncertainty brewing within the government over its fiscal plans and in turn showing once again Sterling frailties.
Over the past couple of weeks there has seemingly been cracks starting to show within the Labour party, with U-Turns on their fiscal policies this week. Markets had been waiting on developments surrounding the welfare reform bill in parliament, where rebels within the Labour party forced Prime Minister Keir Starmer to back down on large spending cuts on Tuesday, leaving a hole in public finances.
Onto Wednesday came Prime Minister’s questions in the House of Commons, with a visibly upset Rachel Reeves on the front benches, who was seen crying, which led to speculation that the Chancellor of the Exchequer could be let go from her position. This saw an immediate sell off for Sterling, losing over a cent on both the Euro and US Dollar.
There were also losses seen elsewhere on British bonds as the 10-year gilt dropped by nine basis points, something not seen since Liz Trusses mini-budget in October 2022, which saw a meltdown in all markets. Keir Starmer has now given full backing to Rachel Reeves in a press conference yesterday, which in turn saw Sterling claw back some losses.
This unpredictable event this week, with a tear bringing fears to investors, shows how uncertainty and the slightest of niggles within the UK government can see Sterling spiral. As mentioned, Sterling has reversed some of the losses seen earlier this week, which presents a good opportunity to lock in your currency should you have a requirement over the course of the next few weeks or months.
Our popular forward contract option could be of interest, as you can lock in at today’s rate with only a 10% deposit, giving you peace of mind – knowing you’re within your budget and crucially removing the risk of the market going against you during the time running up to the completion on your property. As we have seen in the past few of months, not just with UK politics, but also with Donald Trump sending the markets into chaos earlier this year with his tariffs, and war in Ukraine and the Middle East, Sterling remains in a vulnerable position. To add to that further interest rate cuts in the UK across 2025 are still likely, which could see the pound remain under pressure. A forward contract is a great way to remove your exposure to the currency market, giving you peace of mind on what you have budgeted for. Speak to your currency consultant today should you want to take advantage of the current highs and to go through your options.