Sterling has been performing much better lately after improvements in the UK’s economic outlook combined with expectations that the Bank of England will be looking to raise interest rates sooner and potentially higher than previously expected.
Looking to the latest interest rate outlook, the Bank of England has been earmarked to raise interest rates in the future at some stage but this might well need to happen sooner than expected.
Overall, UK interest rates are not set to be raised until the next meeting in early May, which could be a key time for both the pound, but also the Euro and the US dollar too, with expectations for both central banks there, the US Federal Reserve, but also the ECB (European Central Bank) also predicted to raise interest rates.
The raising and lowering of interest rates is one of the biggest factors driving the strength and weakness of a currency, and whilst the pound has been stronger at times in the last year because of this, we do need to factor in the fact the other central banks globally are also looking to raise interest rates too.
Therefore, whilst the pound has been stronger, these other currencies have also been stronger. The Euro is notably much stronger against the US dollar, and for example the Australian dollar compared to more historical levels.
The rest of April has some important data releases which will influence economic and market sentiment, and might well see some changes in the economic outlook and could shape the decisions that are coming up.
Expectations ahead are far from clear but clients looking to buy or sell the pound in the future should be aware of a number of mixed forecasts from some of the big banks in their predictions.
With no clear direction being established either way on the predictions front, careful consideration of all of your options and the potential for something unexpected might be the best way forward.
Thank you for reading and if you wish to learn more, please do not hesitate to contact me directly to discuss in more detail.
Jonathan Watson
