Regular readers might by now becoming familiar with the two key events for December, that is the European Central Bank meeting this Thursday and the US Federal Reserve meeting on the 18th December. These two events carry significant weight on the markets and could easily change the current forecasts on a number of currencies. Whilst clearly not UK based events they will have a big impact on sterling exchange rates as investors move funds in and out of the Euro, USD and others, and then into and out of sterling. Let us remind ourselves what moves an exchange rate, it is the buying and selling of said currency. That demand is in the main triggered by corporate investors looking to capitalise or speculate on the currency markets, basically investing money to make money. Examples include hedge funds, pension funds and banks all seeking to invest funds to turn a profit. Understanding their attitudes to the market and their investing brains can help you too to navigate the markets and not get caught out!
The pound is one of the world’s leading currencies and in any currency portfolio will make up a reasonable share since it represents the wholly independent Bank of England and the UK is politically and economically seen as a safe bet. With the UK on a path to raising interest rates at some point in the future the UK represents a good investment opportunity and this explains some of the pounds gains this year. The outlook is therefore quite favourable for the UK and the pound but because much of this good news is priced in, we could easily see events take a turn in the future, particularly if the UK data does not live up to expectation.
If you have a transfer to consider involving the pound the next few weeks could be critical to determining what you actually receive. Understanding the market and everything going in will really help you to make an informed choice about what is the best way forward. If you have a transfer to consider and would like to receive some expert help and insight on the currency markets and all of your options please contact me Jonathan on [email protected]