Sterling has seen some impressive gains against the majority of major currencies following news from the Bank of England (BoE). There are currently rumours circulating that the BoE could potentially cur interest rates into negative figures at the next Monetary Policy Committee meeting in February. Negative interest rates would mean you would have to pay to hold your money on account at a bank. Such a move could result in many foreign investors taking their funds out of the UK and likely devaluing Sterling.
Thankfully, Andrew Bailey, The Governor of the BoE recently somewhat quelled these rumours by saying that they would be trying to avoid interest rates going into negative territory, although it is not completely off the cards. This was coupled with positive news surrounding monetary stimulus for the UK. It seems in current circumstances the BoE will refrain from pumping large sums into the economy to combat the economic damage caused by COVID-19. Of course further stimulus would add to the UKs already insurmountable debt and would no doubt contribute to the devaluing of the pound similar to the situation in the US where there are rumour of USD 5trillion to be added to the economy.
Brexit and COVID Continue to be Major influencers on Sterling
Brexit has also been anchoring the pound for over 4 years now. Many economists were predicting GBP to EUR could rise above 1.15 or even 1.20, but when the announcement was made there was little movement on the market. This could be contributed to the national lockdown measures in the UK and also to put it simply the deal was not that good.
With Brexit now somewhat behind us could this move the resistance points we have witnessed during negotiations. There was a period of nearly 18 months when Teresa May was in charge where GBP to EUR continuously struggled to breach the 1.15 mark. Now, with some form of clarity surrounding Brexit investors may have more confidence in Sterling.
The UK is also moving in a quick fashion on vaccinations, there have now been over 2.6 million vaccinated. This good news for the economy as the UK could emerge from the pandemic in a quick time frame in say comparison to the US.
With the historic average at 1.33 on GBP EUR, we now sit at 1.12. There is certainly room for improvement. Get in touch using the form below to discuss the direction sterling could take with these factors taken into consideration, and stay informed about the best time to trade.