Volatile Pound ahead of next week’s Bank of England meeting

By Luke Dyson

For the week to date Sterling has been particularly volatile across the board, losing strength against the the Euro and Dollar. The Euro had a small boost from the European Central Bank’s interest rate hike this week, which was announced to be 25 basis points. This hike has now brought the Eurozone’s base rate to the highest recorded of 3.75%.

However the real driving factor behind the Euro holding its strength is the fact the ECB have signaled they are now ready to pause their interest rate hiking cycle moving forward. With inflation still above its target of 2% the ECB has released a statement saying inflation will continue to drop at a steady pace and should be within the target zone of 2% by the end of the year.

All of this could be very damaging for Sterling moving forward as the Eurozone begins to recover at a quicker pace than the UK, we could see Sterling drop further against the Euro in the weeks/ months to come.  It is believed the Bank of England has another three potential rate hikes on the horizon to combat inflation before the UK too is in the same position.

Following this Sterling lost traction against 9 of the G10 currency pairs. Next week the Bank of England has an interest rate decision on the 3rd of August , depending on the outcome we are likely to see some movement for Sterling. Based on previous rate hikes and the current inflation rate, if the rate is hiked further this could potentially be detrimental to Sterling strength across all  major currencies.

If you have an upcoming currency requirement, it may well be worth taking advantage of the current rates as Sterling is still holding its strength to some extent and it’s still a potentially good buying opportunity given where the market has been over the last 6 months. Get in touch today and your currency consultant can run through what strategy would work best for your specific requirements.