By Matthew Vassallo
Sterling’s recent upturn against the Euro has provided those clients looking to purchase a European property with an unexpected opportunity to trade at levels rarely seen over the past three years.
With GBP/EUR rates trading less than half a cent shy of an official 24 month high, the key question is whether the current trend is set to continue?
Whilst UK inflation levels remain considerably higher than the Bank of England’s 2% target (the current level is 2.9%) the latest figures published confirmed a softer rise than predicted. Whilst the UK historically has lower inflation levels than many other countries, thus making its borrowing power far stronger, it is widely anticipated that it will likely rise to almost 4% by the first quarter of 2022.
This dovish outlook has led many analysts to the conclusion that with a surge in prices imminent, the Bank of England (BoE) will have no choice but to raise interest rate hikes before the turn of the year, a move that would likely help energise GBP and support its current higher value.
However, this is of course under the assumption that events play out as currently predicted. The BoE can only gauge their current stance and short-term economic outlook on the information to hand but with their notoriety for shifting goal posts, any further increase in value for GBP is far from a cast iron guarantee.
In fact, recent history would suggest that every time the Pound has made a similar run against the EUR and to some extent the USD, its momentum has failed to carry it through the current levels of resistance we are seeing, particularly against the single currency.
Turning our attention to the US economy and it seems all is not well across the pond, as the world’s largest economy looks set for a tough winter ahead.
Only a few months ago it seemed as though the US economy was set to come back roaring back to life. Yet fast forward to now and their recovery from the Covid economic slump looks like nothing more than a slow grind.
It would seem that the post pandemic US growth forecasts were at best dramatically over estimated, with the most recent predictions indicating a contraction in the job market and key manufacturing sectors.
With president Biden also struggling to get enough support from Congress to support his current mandates, the likely downturn forecasted could send negative shock waves across the global economy, further impacting GBP’s standing against the greenback.