Wednesday 14th May 2014
Sterling has fallen from a 16 month high against the Euro this morning, following the Bank of England inflation report. When the market opened this morning, GBP/EUR rates were sat at 1.2300, which is the highest we have seen since January 2013.
Pound falls on BoE Inflation report
We had various figures from the UK this morning at 09:30am, most of which were quite good; Unemployment has fallen to 6.8%, and the Bank of England raised its growth forecasts. The claimant count number was slightly worse than expected which started the slide in rates.
At 10:30 am the Bank of England releases its quarterly inflation report, and this was then followed by a press conference by the governor Mark Carney, in which he said the economy had “edged closer” to the point when interest rates would need to “gradually rise”.
But he reiterated that increases would be “gradual” and that the rate “may stay at historically low levels for some time”. The Bank also said there was still a significant amount of “slack” in the economy, meaning that it was not growing to its full potential because of underinvestment.
As you can see in the chart above, the Pound has fallen on today’s news. Sterling had been rising on expectations that the Bank would signal rates were likely to rise before the election, but it fell sharply against other currencies after the Governor’s comments.
Despite the more bullish forecasts, and a “modest narrowing” of the amount of spare capacity in the economy, Mr. Carney said “significant slack” remained in the economy, meaning it could afford to keep interest rates at their record low for longer.
It is the fact that rates are now expected to remain low for some time that has taken the steam out of the Pound’s rise and caused exchange rates to dip back away.
When should you fix your exchange rate?
Timing is everything in the currency markets, and converting your funds at the right time can make a huge difference to what you can achieve. If you need to convert Pounds to another currency, or convert a currency back in to Sterling, then why not get in touch with me to discuss your options.
I can discuss what is happening with the market, and explain the options you have available with regards to when to fix your rate, and which type of contract suits your requirements. We can also help you achieve exchange rates that are much better than banks and other financial institutions can offer.
With the Pound trading very close to a 16 month high, it’s a good time to have a chat about your options.