By Matthew Boyle
Yesterday saw the release of UK retails sales figures for September revealing a steep decline – falling 2.7% on last year and way over the 1.7% that was expected. As a result, the Pound lost around 40pips against the single currency, knocking it down from 18-month highs and around 25 pips against the USD. The drop in spending has been linked by some to the fuel shortages we saw during September, with consumers spending their weekends queuing for fuel rather than in the shops. As we now enter the run towards Christmas which is usually the busiest time for retailers and spending, fuel and supply chain shortages combined with higher gas prices could greatly undermine market confidence and hit the economy harder than expected. And while daily warnings of supply chain issues continue the colder weather continues to set in and with it an increasing chance of covid spikes and potential lockdowns – a bleak outlook for the Pound.
Despite this, recent reports that the Bank of England may now raise interest rates before Christmas has pushed the Pound to these levels. I am sure for many of those readers who are in process to buy property these are the best they have been since your start and as such your budget would have benefited greatly from this rise. And you may well want to take advantage now – some analysts suggest that the relatively stable and high rate that we have seen over the last few days has been kept buoyed purely due to buying action at these high levels and that once the buying subsides the rate will fall into the vacuum left. While the Bank of England may raise rates and with it GBP buying rates benefit this is at present speculative.
And regardless with the hurdles the Pound faces over the next through month it is feasible that we may see a drop in rates before an improvement from a rate hike (if any) was seen.
The warning seen yesterday from retail sales could be the starting gun in a downhill race for the Pound. Speak to your Broker today to discuss the current high rates and for some friendly guidance to help manage the risk of increased costs with your currency transfer.