Sterling has had a relatively decent end to the week, breaking the €1.17 barrier vs the Euro, and comfortable above $1.31 vs the US Dollar. The main reason for the gains is a slightly more Bullish Bank of England coupled with slightly better than expected data. Gains are likely to be limited however while Brexit uncertainty remains.
Bank of England helps boost Sterling
This week’s Bank of England (BoE) meeting had a more hawkish tone, and this helped the Pound strengthen a little. While interest rates were again left on hold for the 8th month in a row, as expected, comments made by the Governor Mark Carney helped Sterling. He stated that interest rate increases will happen faster than the markets currently expect, and that they will rise more in the next few years if the economy grows as expected and inflation reaches target levels. The prospect of higher interest rates generally strengthens a currency as it means a higher return for investors. However, few expect any moves before Brexit is sorted out, so gains were a little muted.
The BoE also raised its growth forecasts for the UK to 1.5%, as the global economy starts to show signs of stabilising. They also said that unemployment could fall further from its current record lows.
Further gains unlikely while Brexit remains unsolved
The upbeat tone from the BoE is positive for the UK economy and has helped the Pound. However we feel that there aren’t likely to be any significant gains for the Pound until there is more clarity over the UK’s exit from the European Union. The current GBP/EUR levels however are only just below the best we’ve seen in 2 years. For this reason, any clients that need to buy Euros may wish to consider fixing a rate while these levels are available. If a Brexit deal is agreed then we may see exchange rates rise further, however this may not happen for several months.
Need to buy Euros are the best exchange rates?
Even if you don’t need to make your transfer right now, we offer the option to freeze the current rate for a future date by lodging a 10% deposit. If you would like to have a chat about how we can help you with your currency requirements, contact us today.