USD strength helps pull GBP-EUR higher

By Lauren Buckner

The USD surged through trading late Wednesday night and yesterday following the positive sentiment at the Federal Reserve’s (FED) policy meeting. Signalling that they would be ready to start raising interest rates at their next meeting in early March we saw the value of the USD push higher on the back of already positive moves this week. The relevance of this for the majority of our readers is that the USD has moved significantly against the Euro (an 18 month high) and therefore enabled GBP to capitalise on this move and flirt with the key 1.20 trading level through yesterday..

The FED leaned on US inflation levels running at their highest level since 1982 at 7pc and the rebound in the jobs market as key indicators that it is time for interest rates to rise for the first time since March 2018. US GDP further cemented this approach at its highest level since 1984 with an annualised rate of 6.9pc for Q4 2021 showing that the economy is well equipped to support higher rates for borrowing. This follows the predicted path for the UK with the Bank of England already leading the way with their first rate rise in December and mounting speculation of a second next week. The Euro is impacted significantly as the European Central Bank remain firmly neutral on interest rates as the EU experience a sluggish economic recovery following the pandemic, a direct contrast to both the UK and US.

Perhaps the reason that the Pound is struggling to breach the 1.20 interbank level is mounting pressure on Boris Johnson to resign following revelations of numerous party gatherings amongst senior Tories and at No.10 throughout UK lockdowns. Although firmly stating that he will not resign you cant help but recollect the many times Johnson has made a U-turn on his position, Brexit negotiations and hard deadlines being a more recent example. However, the fire beneath a vote of no-confidence amongst his party is starting to heat up as we still await the release of the Sue Gray report.

Originally expected on Wednesday it is unclear what delays the delivery of the report to the Prime Minister, although speculation is that the Metropolitan Police investigation has stalled things somewhat as Police Commission Cressida Dick study’s its contents. It is unclear if we will see the report this week at all but Johnson has confirmed that the report will be released in full. Political instability would be expected to drop the value of the Pound. Can Boris continue to hold on to the top spot?

There is much to be discussed at the moment regarding global markets and its impact on fx and increased levels of uncertainty, please do get in touch to discuss how to protect your budget when purchasing your dream property abroad.