Despite trading within a thin range against the Euro last week, the Pound experienced a pretty significant drop against the US Dollar as the week progressed, making the cost of buying US Dollars with Pounds a lot more expensive.
Sterling saw a fall of 3% over the week’s trading, and this was the biggest drop for the Pound against the US Dollar since late September. At the end of September the former Chancellor of the Exchequer gave the disastrous mini-budget which saw the rate of cable GBP/USD) drop below 1.10 and some financial commentators believe the rate could drop below this level once again in the not too distant future.
Last weeks drop comes at a time when both the Bank of England, and the US Federal Reserve Bank both opted to hike interest rates by 75 basis points.
The base rate of interest in the UK is now 3% and the decision to hike by 0.75 percentage points was the biggest hike in 33 years.
Normally, aggressive interest hikes could see the underlying currency strengthen as the currency becomes more attractive to hold funds in. This doesn’t appear to be the case this time and much of the reason behind this was the wording used by Bank of England members in recent interviews.
Due to the UK expected to enter a recession, some predicting the longest recession on record, the Bank of England has signalled that it won’t be hiking interest rates as much as some economic analysts are expecting.
The choice of words used by members of the BoE and the forward guidance offered could be key for the Pound’s value moving forward, against all major currency pairs so it’s worth looking out for these speeches if you’re interested in the Pound’s value moving forward.
If you wish to discuss an upcoming currency exchange with us you can contact me (Joe) on [email protected] directly. I will be happy to offer you a quote and explain how our service may help you save money when making currency exchanges. We also offer rate alerts to help keep you informed regarding price fluctuations.