Friday 24th January 2014
Good afternoon. We have seen Sterling weaken significantly today, after the Bank of England governor poured cold water on the chances of interest rates going up any time soon.
Speaking at the World Economic Forum in Davos, he admitted that its new "forward guidance" on increasing interest rates will need to change because unemployment has fallen far faster than expected. He added it was time to "evolve" the guidance, raising the possibility the Bank may abandon the 7% unemployment trigger to consider an increase in rates. You can read more about what he said here on the telegraph site. This is what happened to Sterling/Euro rates after he spoke:
What does this mean for exchange rates?
Earlier in the week the excellent unemployment figures pushed Sterling to a 12 month high against the Euro, and this was because the level was falling to the 7% target that analysts thought would trigger an interest rate rise.
The comments from Mark Carney today counteract that, and as a result the gains are gone, and as is often the case the spike was short lived, the Pound has fallen back away. I think it’s now unlikely Sterling will make any further significant gains now the market has corrected, although we are still above €1.20 against the Euro which is a good buying level. Those that need Euros may wish to fix a rate to protect against rates falling further.
I have been saying for some time that if exchange rates rose much higher, don't be surprised to see the Bank of England move to weaken the Pound back off so that UK exports don't become too expensive, and that's exactly what we have seen happen today.
If you are converting Euros or another currency back to Sterling, then today's move represents a decent move in your favour. Medium to Long term, the Pound will likely strengthen again, so it’s worth discussing your options with me regardless of which currency you need to move.
Getting the best exchange rates
This is all about timing. If you look at my post on Monday, you will see I highlighted the fact that Wednesday’s unemployment figures would be key for Sterling, and indeed they were as we saw rates surge. I also warned that any comments from the BoE that hinted no rate rise was on the cards would cause the Pound to drop in value, which again proved to be the case.
This demonstrates that having a good currency broker on your side to help explain what could move the market is key to getting the best possible exchange rates. If you have an upcoming currency transfer to make, and would like to discuss your requirements, then you can click below to send me a free no obligation enquiry. I can discuss what you need to do, run over the options available to you, and explain what could happen to move rates either for or against you.
Click here to send a free enquiry now
In this way you can take control of your requirement and make an informed choice about what to do. Getting your timing right and achieving a good exchange rate can save you thousands of Pounds.
I will be back on Monday as usual, with a full breakdown of what is happening throughout next week that could affect exchange rates.
Have a great weekend.
Alastair Archbold
Labels: Bank of England, Best Exchange Rates, Mark Carney, Pond/Euro, pound sterling forecast, When to fix your exchange rate
