The next Bank of England interest rate decision scheduled for Thursday 15th September (a Week today) will likely be one of the key factors impacting the value of the pound over the next 7 days.
We have recently witnessed aggressive interest rate hikes from the likes of the Federal Reserve in the US and expectations are that today we may see a similar stance from the European Central Bank.
Given the fact that many other central banks around the world are acting with force and so far the BOE have been softer in their approach, investors are questioning whether the BOE’s stance may start to weigh heavily on Sterling exchange rates and lead to the inflationary problems lasting longer for the U.K than elsewhere.
In terms of Sterling strength/weakness, an interest rate hike usually gives a currency a boost in value, as it makes it more attractive to investors, so the fact that other economic areas are going full steam ahead with substantial hikes and the BOE are being a little more timid is most likely helping to make the pound a little weaker.
The market is expecting a 75 basis point hike for the ECB today, and comments following the decision will likely lead to further Euro volatility, which way it goes does depend on the tone of the press conference following the meeting, this press conference is held at 13:30pm and can be quite a market mover, so if you have Euros to buy or sell then do make sure you keep an eye on the market during the hour or so that this goes on.
The ECB decision is at 12:45 and that equally could have an impact on the Euro if the hike is higher or lower than expected.
All eyes now for the pound will be on if the BOE do push forward and join the party, if it appears that we will be seeing a 75 basis point hike next Thursday then expect a little Sterling strength and if comments in the lead up to the decision do start to suggest lower then the pound may weaken a little.
It cannot be forgotten about that we still have a new Prime Minister who has plenty on her plate and a huge number of issues to sort out. Any announcements on the energy crisis and any other plans from Liz Truss and her new cabinet also have the ability to move sterling exchange rates.
Unfortunately for those looking to buy foreign currency with pounds, the markets seem to be slowly treating the pound as an emerging market currency, slightly down to Brexit but it has been noticeable that over the past 5 years the pound tends to struggle when there is a low risk appetite out there, where as previously it used to be seen as a little more of a stable currency in times of global uncertainty.
Clearly we appear to have plenty more global uncertainty on the cards in the months to come, so if you need to move money in the coming weeks or months it may be prudent to consider the options at your disposal.
Here at Pound Sterling Forecast all of our writers have over a decade of experience in the foreign exchange industry and we can help clients move money too, we have various options to protect you against adverse market movements and our speciality is overseas property purchases and sales. If you are in the position where you may need our help and expertise, feel free to contact me (Daniel Wright) directly on [email protected] or by clicking here and one of our team will be happy to get in touch.