What next for the Pound?

By Matthew Boyle

The Pound has seen a welcomed boost this morning following surprising data showing GDP growth at 0.5% for June – heftily beating the 0.2% prediction and showing a significant up-tick the -0.1% in May. Perhaps more significant to this jump in rates was the quarterly growth reading which was up to 0.2% in Q2 from the 0.1% in Q1, while the prediction was it would be 0.0%. In what many would class as a surprise given the current economic landscape, this combined with better than expected industrial and manufacturing data saw the Pound gain around 30pips (0.3c) against both USD and EUR.

This clawback is great news for GBP>EUR buyers given the rate had been on a slow-slide over the last couple of weeks, leaving it around 1.5% down from the recently seen 11-month highs.

Those reading may want to consider taking advantage of this spike though as set against the shock data, which was against most expectations,  a paltry 30pip improvement might offer insight into current market sentiment and what is to come.

I would suggest Euro buyers with an upcoming requirement could consider buying now. I am sure you are asking why?

Interest rates have dominated the financial markets for some time now, as central banks race to fight domestic rising inflation seen on a global scale.

Higher interest rates are typically good for a currency as it can attract foreign investment and boost bond and yield markets – as we have seen in the UK. On the flip-side higher interest rates are bad for borrowing as higher interest of course means more must be paid back.

The Bank of England have hiked rates 14 times since Dec 2021 with the rate now at 5.25%, but the consensus is last weeks is likely the last (for now), with inflation figures now dropping slightly.

With no more hikes the UK bond and yield markets will begin to lose their attraction. Borrowing will continue to feel the tightening grip of higher rates though, particularly mortgage providers and the housing market.  The result of such a rise in rates means for many homeowners the result could be a doubling or even tripling of their mortgage repayments. The ripple effect when increasing numbers of homeowners meet this event could be devastating. But of course, not everyone’s mortgage needs renewing at the same time.. tick-tock.. hello recession, goodbye Pound?

Call A Place in the Sun Currency today for guidance on how we can help you protect your hard earned pounds, when converting to buy your own place in the sun.