Typically a currency should increase in strength on the news of an interest rate hike being on the horizon. So for example September’s news that rising Inflation in the UK could see the Bank of England raise interest rates in November, has seen the pound much stronger. Sterling was in fact, one of the best performing currencies for September. So will the Bank of England raise rates and how will the pound react?
If you have a transfer to make in the future then making plans around this possible event is vital since the uncertain nature of a hike will lead to and has led to plenty of volatility for the pound. It was only in July that the pound rose by a couple of per cent against most currencies on similar expectations only for the rates to quickly drop back as Inflation fell and it became apparent no hike would be forthcoming.
I firmly believe the economic data will not support a hike for November and this will lead to the pound falling in the future. I am also of the opinion that even if they do hike it will be met with so much caution in the commentary by the Bank of England that any strength will be short-lived. Let us remind ourselves of the major political and economic uncertainty Brexit is creating fort he UK and the pound. I am not trying to be a negative nelly, just a realist. Is now really a good time to be raising interest rates when the UK economy is only growing 0.2%? I really don’t think so and think the pound is still destined to remain on the ropes.
If you are looking for the pound to rise or fall, it is this issue which could inject some real volatility into the rates in the coming weeks. For any clients looking to buy a foreign currency with the pound making plans in advance and getting an understanding of the latest trends and themes is crucial to getting the best deal. If you have a transfer to make buying or selling the pound and wish to be kept up to date with the latest news and get the best rates of exchange, please speak to me Jonathan Watson by emailing me directly on [email protected]
