Turnaround for the Pound?

By Matthew Boyle

This week we have seen the Pound push up against both the Euro and Dollar reaching close to the best levels seen in nearly five months for the single currency and 10 weeks for the greenback.

Testing key levels of resistance against both, some suggest we have seen a turnaround in the Pound’s fortunes with further gains on the horizon, whilst others that we have had a run of good fortune which at some point will run out.

Undoubtedly though market sentiment towards Sterling has shifted from what was a largely pessimistic one to becoming increasingly optimistic.

This shift though been aided at times by weakness in the other majors. The recent collapse of US bank SVB and Credit Suisse going to the wall allowed the Pound to gain with the UK banking system acknowledged as being much more resilient. With the Pound largely outperforming expectations it was the best performer in the majors, making gains over all other G10 currencies.

This Q1 performance by the Pound has led to both the ONS and the Bank of England to raise their growth forecasts for the Pound later this year and without doubt this is a huge factor as to why sentiment may be shifting. Rewind to August last year the pound was nearly 5% higher than where it sits currently. It was then the BoE shook the Pound with announcement it expected a long recession and saw Pound rates start to drop. The Truss/ Kwarteng budget bomb decimated it.

Fast forward back to today with a currently outperforming pound, EUR and USD weak and at least some political stability returning the Pound is seeing some strength return.

However, whilst some see this as a tipping point many suggest the Pound will not break through these current levels and will fall back. Significantly the BoE thought to raise rates one more time where the ECB look set for many having starter their programme of hikes sometime after. With higher interest rates bringing a currency strength this could be bad news GBP/EUR rates.

And with the cost-of-living crisis ramping up this week following price hikes in several areas, as this filters through we can expect downside pressure on GBP rates.

Regardless of whether it is turnaround or otherwise with rates currently at such good levels it is far from a bad time to convert your Pounds now. There is little data of note today that is likely to affect GBP with Pound releases quiet as we look forward to a long Easter weekend. With the coming weeks and months though posing numerous hurdles for the Pound, speak to your Consultant today if you would like to look at some options which can help you avoid risking a costly change in rates.