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Record UK wage growth pushes the Pound higher, could the Pound continue to climb?

By
Joe Wright
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The Pound is in the financial headlines today after reaching a 15-month high against the US Dollar this morning, after some stronger than expected wage growth data has given the Pound a boost.

The Pound to US Dollar exchange rate, known as cable within the currency markets has hit a high of  1.2913 this morning, which is the highest level since April the 25th last year. The Pound has also broken back above 1.1700 against the Euro which is within 0.5 cents from the 11-month high so once again we’re seeing GBP exchange rates climb off the back of economic data releases in the UK.

Wages growth within the UK rose at a faster rate than markets expected in May according to the data released this morning. City analysts had expected to see a rate of 7.1% but the figure released was 7.3% which is the highest rate on record outside of the pandemic period, which was a time where many might argue that the figures were skewed.

This increase adds further pressure on the Bank of England to once again hike interest rates at their next opportunity, which will be on the 3rd of August. This would be the 14th consecutive interest rate hike as the Bank of England attempts to reduce the rate of inflation within the UK which is the highest in the developed world.

The expectation of further hikes is behind the Pound climbing, so if you’re following the Pound’s value economic updates such as wage growth, inflation levels and of course interest rates are all data releases that can impact Sterling’s value.

If you would like to be updated in the event of GBP market movements, do feel free to get in touch to register your interest.

GDP figures, Industrial and Manufacturing figures will all be releases early on Thursday morning which are the next potential market movers.

Will the expectation of higher interest rates push GBP exchange rates even higher?

By
Joe Wright
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GBP AUD Dips Again Ahead of BoE Rate Decision

The Pound was the strongest performing currency in the first half of 2023, after gaining by almost 5% against the US Dollar and by almost 3% against the Euro.

Although Sterling exchange rates dropped yesterday as the second half of the year began, it’s been a very strong first half of the year for the Pound as the expectation of higher interest rates continues to climb.

After dropping to almost parity in the wake of former Prime Minister (Liz Truss) haphazard budget last September, the Pound to US Dollar exchange rate has climbed to 1.2700 which demonstrates how strong the recovery has been for Sterling. It’s also climbed from 1.0840 to 1.1640 against the Euro during this time.

The gains are a result of the Pound becoming a more attractive currency to hold assets in, as the Bank of England has hiked interest rates on 13-consecutive opportunities pushing the base rate of interest up to 5%.

Some financial commentators have questioned whether the hikes, and anticipated future hikes have run their course when it comes to Sterling strength.

Something to factor in though, in my opinion is the expected peak continues to climb. Some speculators within the City are betting that rates will peak at 6.2% in mid-2024 which is an increase from the previous expected peak of 5.5% by the end of 2023.

Within the developed economies the UK inflation levels are highest which is the reason behind the aggressive rate increases by the Bank of England, as they try and counter the increasing cost of living.

The current rate of inflation is 8.7% and core inflation is above 7% so both figures are well above the BoE’s target of 2% which is why interest rates have continued to climb, pushing the Pound higher.

Economic data releases are very quiet today especially as there is a public holiday in the US today (Independence Day). Sentiment is therefore likely to be the main driver of currency fluctuations so do register your interest if you wish to be updated regarding GBP exchange rate fluctuations.

Will the Pound get stronger against the Euro in July?

By
Tom Holian
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GBPEUR Rates to move up in July?

The Pound Euro exchange rate earlier hit this month hit its best level to buy Euros since August 2022.

The main issue impacting both the UK and Eurozone is that of inflation.

The main way to combat rising inflation is to hike interest rates, which is what has been happening both in the UK and Europe.

Earlier this month the Bank of England increased interest rates by 0.5%. This was the thirteenth interest rate hike in a row by the central bank.

Out of the 9 members we saw a vote of 7-2 to hike rates by 0.5%.

This signals that the central bank is not yet done with their current monetary policy as inflation still remains high.

The speed of the interest rate hikes have caused the Pound to strengthen over the last few months.

The Pound Euro dropped marginally earlier this week after the European Central Bank suggested that they are not yet finished with their current monetary policy.

Therefore, we saw the Euro fight back vs Sterling by 1.5 cents but the Pound is already once again starting to move upwards again.

I think we could see further gains for the Pound as we move in to July.

Inflation is still a huge issue in the UK but Europe is also struggling to contain it as well.

The main difference between the two areas is that the Bank of England can move quickly whereas the European Central Bank has to ensure policy changes work across the continent.

Therefore, they can often be much slower with policy changes and this could cause the Euro to struggle slightly vs Sterling.

If you would like a free quote when buying or selling Euros then contact me directly on email [email protected]

Will the Pound fall if the UK enters a recession?

By
Joe Wright
-

At the time of writing the Pound is trading towards the top end of its 2023 ranges against most major currency pairs.

Last week, the Bank of England opted to hike interest rates by 0.5% which came as a surprise to financial markets, after a hike of 0.25% was expected.

Sterling exchange rates were quite volatile in the aftermath of the decision to raise rates by 0.5%, and GBP/EUR peaked just below 1.1750 which is the highest level the pair have reached so far in 2023, and just over 2-cents from the annual high.

Not only has the Pound been generally climbing against most major currency pairs, but the Euro has also seen weakness recently which has helped boost the GBP/EUR exchange rate. The weakness for the Euro is a result of Germany technically falling into recession this year after two consecutive quarters of their economy shrinking.

There have been some predictions that Germany will break out of recession due to growth in the second quarter of 2023, but the impact has arguably been felt by the Euro after the currency has weakened against both GBP and the US Dollar.

A similar pattern could be felt by the Pound if the UK falls into recession as some analysts are predicting.

Inflation levels have been increasing within the UK, which is why the Bank of England has hiked interest rates 13-consecutive times with the base rate now sitting at 5%. There are concerns over the knock-on effects of the dramatic increase in the cost of living and mortgage rates within the UK and how they could push the UK into recession. This is worth following as the Pound could be impacted by negative growth coupled with the increasing cost of living.

A number of Bank of England members will be speaking this week including Governor Andrew Bailey tomorrow afternoon. Another important data release to be aware of is this Friday’s GDP data which covers economic growth in the UK. If you wish to discuss these data releases in further detail do feel free to get in touch.

Sterling hits a 10-month high against the Euro, could the Pound climb even higher?

By
Joe Wright
-

The financial markets are gearing up for what could be a busy week for exchange rates, particularly the Pound as on Thursday the Bank of England are expected to hike interest rates.

The base rate currently sits at 4.5% after 12 consecutive interest rate hikes from the Bank of England (BoE).

The expectation is for another 0.25% hike this Thursday, although analysts believe there is a 25% chance of a 0.5% hike. This would be an unusual move from the BoE in my opinion as they rarely shock the markets, but it’s worth being aware of in case they surprise the markets and hike by a greater amount than expected.

Inflation levels within the UK are more stubborn than in other developed economies at the moment, and this has resulted in a more aggressive approach to monetary policy from the BoE. The increase in expected rate hikes/yields within the UK has caused GBP to rally in recent weeks, making it the strongest performing major currency so far this year.

Goldman Sachs have reported that the Pound is at its highest level on a trade weighted basis since mid-2016. This was just after the Brexit vote for reference.

Aside from the interest rate decision on Thursday, Wednesday could also be a busy day for GBP exchange rates. Inflation data will be released tomorrow in the form of annual CPI figures. In April the annualised figure was 8.7% and the figure for May is expected to show 8.5% year on year.

If the CPI figure released is higher than 8.5% it could signal that further interest rate hikes are needed so it’s worth following, as it could influence GBP exchange rates.

If you would like to be updated in the event of a major market movement, or you would like to discuss exchange rates with me, do feel free to get in touch.

Pound to Euro exchange rate drops from its 6-month high, will the Pound continue to fall?

By
Joe Wright
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GBP EUR Dips After Spanish Inflation Jump 

Last week we witnessed the Pound hitting a 6-month high against the Euro, almost climbing as high as 1.1700 as the GBP/EUR pair broke above 1.1660 at its highest level.

The peak of last week was just over 3-cents from the annual high which came in August last year, but since then Sterling has tailed off slightly and dropped back into the 1.15’s at the mid-market level.

It’s not unusual to see a slight sell off after a bullish run within the currency markets, and I don’t think that the Pound has been helped by the lighter than usual economic calendar this week.

The monetary policy of the Bank of England and the expectations of future hikes continues to drive Sterling’s value. Last week’s highs could be attributed to the increasing chances of a 50-basis point hike from the BoE later this month (June 22nd) although the most likely outcome is a 25-basis point hike followed by another at the BoE’s next meeting in July.

The rate of inflation will continue to drive expectations of the BoE’s policy changes, as it continues to try and counter inflationary pressures.

As previously outlined the economic calendar within the UK is very light this week, and the only data due out this week relates to property prices. This will be releases early tomorrow morning by Halifax and historically speaking this kind of data release has little impact on the Pounds value.

Perhaps the key release for GBP/EUR this week will be the GDP data which comes out at 10am on Thursday morning.

If you’re following the Pounds market movements and would like to be notified in the event of a major market movement for the Pound against other currencies, please feel free to register your interest with us.

You can contact me (Joe) directly on [email protected] and I’ll be happy to offer you some insight and quotes regarding a transfer you plan on making.

Will the Pound to Euro exchange rate break above 1.16 this week?

By
Joe Wright
-

The Pound has begun the week in a bullish fashion after the Spring bank holiday yesterday, with the GBP/EUR exchange rate hitting a fresh 6-month high this morning.

Despite the economic calendar in the UK being very sparse this week, the economic data releases overnight has provided the Pound with a boost.

To summarise the data released last night, overall shop price inflation has hit a fresh high according to the British Retail Consortium (BRC), although fresh food inflation has eased slightly for the first time in a while. The overall index has climbed to 9% but fresh food price inflation dropped from 15.7% to 15.4%.

The increasing rates of inflation within the UK has resulted in the Bank of England hiking interest rates 12 consecutive times, and financial markets are pricing in another hike next month with a 0.25 basis point hike a 90% possibility, and a 0.5 basis point hike a 10% possibility according to analysts.

With the overall inflation rate climbing, analysts are now expecting the Bank of England to hike the base rate up to 5.5% by Autumn.

The rate is currently 4.5% so the expectation of further raises is perhaps the reason behind the Sterling strength we’ve seen so far this morning.

The Pound has reached a fresh 6-month high of 1.1565 so far today, after previously struggling to break above the 1.1550 level despite consolidating about 1.1500. There has been little volatility over the past month, with the Pound gradually climbing roughly 2% over the past month against the Euro.

The next interest rate decision will be on the 22nd of June, and in the lead up to that decision it will be data releases such as the RBC’s overnight that can impact the Pound’s value.

Do feel free to get in touch if you wish to discuss an upcoming transfer you plan on making, or if you would like to be updated in the event of a major market movement.

We will also be happy to offer exchange rates and discuss the different contract types we offer. You can contact me (Joe) directly on [email protected] with an outline of your plans and I’ll be happy to discuss your plans with you.

Could the focus on the Bank of England this week influence GBP exchange rates?

By
Joe Wright
-
GBP AUD Dips Again Ahead of BoE Rate Decision

In recent weeks, the Pound has remained relatively rangebound against the majority of major currency pairs.

The main focus of our daily blogs is the GBP/EUR pairing and since the Pound broke above 1.1400 at the beginning of the month, there has been less than a 1.5 cent range of movement with GBP/EUR consolidating above 1.1400 and struggling to make much progress into the 1.15’s.

Cable (GBP/USD) has seen a bit more volatility than GBP/EUR, with the Pound dropping off slightly after hitting an 11-month high on the 10th of May.

This week the Bank of England are likely to be in focus as the currency markets try to second guess the Central Bank’s next policy moves along with the direction of the Pound.

The International Monetary Fund and the Bank of England are currently at odds regarding the UK’s economic output with the IMF predicting a decline in output for the UK this year. This would be weakest showing from all of the major economies, but interestingly the BoE is predicting growth this year for the UK economy after previously predicting a recession.

The IMF are in the UK today and will give a press conference this morning at 11.15am to report on their most recent outlook for the UK economy.

At the same time the Bank of England Governor Andrew Bailey along with other members of the Monetary Policy Committee will discuss their reasoning behind the most recent interest rate decision.

Earlier this month the base rate of interest was increased for the 12th consecutive time, and some market analysts believe there is an 80% chance of another hike this summer.

The comments and language used could impact GBP exchange rates, especially if hints at the BoE’s next moves are made obvious in today’s speech.

There will be further speech’s throughout the week from BoE personnel, so it’s worth being aware of the potential impacts they could have on the Pound’s value.

If you wish to be updated in the event of a big market movement for the Pound, do feel free to register your interest with me (Joe).

We are also happy to offer quotations on currency exchanges, and to discuss to various contract types we offer.

You can email me directly on [email protected] with an outline of your plans, and I will be happy to explain how we can help.

Bank of England Interest Rate Decision – When should I buy or sell the pound?

By
Jonathan Watson
-
GBP EUR Exchange Rate: The Week Ahead October 31st

Pound sterling poised for Bank of England meeting tomorrow

Tomorrow is the eagerly awaited Bank of England interest rate decision. Expectations are locked on for a 0.25% hike from the Bank of England.

This will take interest rates in the UK to 4.5% and could lead to volatility for pound sterling. Exchange rates can be heavily influenced by changes in interest rate policy as I have written previously.

GBPEUR has hit fresh highs at 1.15 which is a six-month high. GBPUSD remains near the 13-month highs of 1.26. This is presenting an excellent opportunity for sterling holders buying these and other currencies.

Reports suggest the FX markets could be turning more positive on the pound. Investors have spent much of 2023 fearful over the UK’s economic outlook.

Good things come in threes… for some.

If the UK raises interest rates 0.25% as expected, it will be the third central bank in a row. The Eurozone and United States both raised their rates this amount last week.

What may be more attention grabbing is the commentary afterward. Financial markets will gauge the economic outlook when Governor Andrew Bailey speaks and updates inflation and growth forecasts.

Focus is on two points, the possibility of further increases or not, and the timing of when cuts will begin.

The Times reports Capital Economics envisage this the last hike by the Bank of England. They predict cuts next year take the levels down from a projected 4.5% tomorrow, to 3% by the end of 2024.

This echoes the sentiment toward both the United States and the Eurozone. Interest rate cuts are predicted for 2024 once the current interest rate hike cycles are completed.

What can we expect for the pound tomorrow and ahead?

Our latest research indicated of 54 banks, only 9 believed rates would be above 1.14 on GBPEUR.

That research, consulting all the big names in banking is coming under pressure with interbank rates at 1.15 today.

Will the pound be weaker after the latest Bank of England decision? Both the Euro and US dollar both weakened after the hikes by the ECB and the Federal Reserve.

Economic theory suggests that when an interest rate is raised, the currency would strengthen. This is not always the case in practice as the recent US and Eurozone decisions prove.

Despite our research suggesting sterling might be weaker ahead, there is no guarantee as markets, and forecaster’s views change.

The FT reports today that Citigroup has stated they were “wrong” on sterling, in their more negative predictions.

The FT also reports data from the Commodities and Futures Trading Commission showing a more positive outlook on the pound. This shows net sterling futures contracts on GBP indicate a rise rather than fall for the first time since Feb 2022.

When should I buy or sell the pound?

This is a complex question which we will endeavour to answer through careful analysis of your situation and consulting the various options we have. We also look at the latest FX research and consult decades of expertise managing FX risk for our clients.

It is only by examining the forecasts and understanding your position and your options, that you can give yourself the best chance to get a rate you will be happy with.

Thank you for reading and please contact us to learn more.

Jonathan

[email protected]

GBP exchange rates climb as focus turns to the Bank of England this week

By
Joe Wright
-

The Bank of England is expected to increase the base rate of interest for the 12th consecutive time this Thursday, taking the base rate up to 4.5%.

An increase of 0.25% is expected, as the Bank of England continues its struggle to contain high inflation levels. Britain has the highest level of inflation within the G7 group of advanced economies and inflation remains above 10% despite the Bank of England targeting 2%.

Increasing interest rates often strengthen the underlying currency and this is a pattern we’ve seen in recent weeks, as GBP/USD has climbed to towards the highest levels of the past year.

The GBP/EUR exchange rate has also seen some gains recently, with the pair testing the 1.1500 mid-market level this morning for the first time since early December of 2022. This leaves the current trade levels sitting at a 6-month high.

If the Bank of England hikes rates as expected this Thursday to 4.5%, it may not be the end of the BoE’s rate hiking cycle.

This week investment bank Goldman Sachs has warned that the base rate could reach as high as 5% in order to counter the stubbornly high inflation levels Britain is facing.

This could push the Pound higher so it’s worth following the BoE’s interest rate decisions. If you would like to be kept up to date regarding interest rates or price spikes for the Pound do feel free to register your interest with us.

Another important data release out of the UK will be this Friday’s GDP release, which covers economic output in the UK for both March and the first quarter of this year.

If you would like to discuss an upcoming currency transfer you plan on making, do feel free to get in touch regarding your plans. We will be happy to offer insight, quotes, and also highlight the upcoming economic releases which could impact the currency pair you’re focused on.

You can contact me (Joe) directly on [email protected] with an outline of your plans, and I’ll be happy to offer insight and prices.

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Where interbank exchange rates are referenced within the website these should only be used as a guide on the performance of a market. These rates are not indicative of our exchange rates – please contact us for a quote.

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