By Ashley Finill
Today is that start of the month of May, and with it brings a fresh rollout of data from all economies across the world and hot on the agenda is who will jump first at cutting interest rates, the European Central Bank, the Federal reserve, or the Bank of England? In answer to that question, is that nobody really knows, but recent data out in the EU as late as yesterday has started to raise eyebrows that a cut could be imminent. It’s thought that the ECB could be the first to cut rates and this was backed up with yesterday morning’s data figures as the EU posted better than expected inflation figures and positive GDP showing growth in the economy in the first quarter. This has solidified the ECB’s case to cut their interest rate at their next meeting and would be first to take the leap to cut rates. The steady inflation news gave the Euro a boost against both Sterling and the US Dollar in the early Tuesday morning trading, but gains were somewhat short lived as both fought back throughout the day to gain back what had been lost. At this moment in time Sterling is trading at the top of the current range once more, clawing its way back from the losses seen a couple of weeks ago. Recent Sterling weakness was due to the deputy governor Dave Ramsden of the BoE suggesting that the bank may have to look at cutting interest rates sooner rather than later in the UK and looked more likely to cut in June. This put Sterling in a fragile position, as high interest rates have given the bound a mass of support over the past 2 years, but when cuts are even mentioned by members of the BoE, Sterling starts to wobble and falls off it’s perch against both the Euro and the US Dollar. The BoE meet this month on Thursday the 9th of May and although an interest rate cut isn’t expected, the following press conference at 12.30pm is likely where we could see some movement, as Andrew Bailey will give insight into their plans for the coming months. Over to the Fed who will meet tomorrow and vote on their interest rate decision. Yesterday, the states had their own concerns with inflationary pressure as the measure of wages in the country rose by 1.2% which is higher than expected and reports are now suggesting that an interest rate cut in the US is even more unlikely and as result, the greenback gained nearly half a percent on both the Euro and Sterling continuing to be the stronger currency of 2024. With all this speculation on interest rate cuts, brings with it risk. As we have already seen in the past couple of weeks, the pound started to show vulnerability to any talk of interest rate cuts from the BoE, and we are likely to hear chatter of their plans over the next 9 days which could spell bad news for the Pound and may show weakness again. If you have a currency requirement coming up in the next weeks or month and have more risk averse attitude then it may be worth speaking with your currency consultant today to discuss your options, we have contracts in place tailored for your needs giving you certainty of your budget and peace of mind that you are not at the mercy of the unpredictable markets.
UK General Election
UK Prime minister, Rishi Sunak was question over the weekend as to when the next general election will be held and refused to rule out one for July. Although it is not expected to be called for this date, Sunak has said that he is working on the assumption that an election will take place in the second half of this year with an Autumn election predicted. Although this may not influence the currency markets at this moment, should an election called unexpectedly, then uncertainty could set in for the pound as we have seen with almost all political events in the UK like past elections, Brexit etc which have not boded well for the pound. One to keep your eye on if you have a more long-term requirements over the next 6 months, as mentioned above, we have contract options in place to take advantage of to remove any risk of economical and political news affecting the markets. Call your currency consultant today for more information.