Pound jumps up again on UK inflation

Higher interest rates are good for a currency.

UK inflation has come out higher than expected this morning.

While bad news for consumers, it’s good news for the Pound (and good for those of you looking to buy Euros when buying French Property).

The trend in GBP/EUR has been positive in 2023.

It’s been helped along by the UK’s high inflation rate and subsequent interest rate hikes.

Higher interest rates are good for a currency.

The markets have been pricing in an 84% chance of another interest rate hike at June’s meeting.

Inflation is still the big bad wolf in currency markets.

In Europe, the ECB President (Christine Lagarde) is determined to win the inflation battle.

“We will be courageous” she said this week.

It’s hard to tell the difference between courage and stupidity most of the time. Either way, the ECB’s tough stance will help to underpin the Euro over the coming months.

In the US, the debt ceiling drama continues.

While the odds are high things will get resolved, the consequences could be catastrophic if no compromise can be reached. For now, the US Dollar remains in limbo.

So what next, what should you do?

As always, new events lead to opportunities and risks.

Do get in touch with the Key Currency team regarding any upcoming payments.

We will be happy to assist and help make the most of your money.

Call us on 01872 487 500.

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Current rates:

Wednesday 24th May 2023 at 11:30

£1.00 GBP = 1.1512 EURO

£1.00 GBP = 1.2380 USD

£1.00 GBP = 1.8852 AUD

£1.00 GBP = 2.0221 NZD

£1.00 GBP = 1.6780 CAD

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Pound within reach of new 2023 highs

A few wobbles for the Pound lately, but it’s still hovering near 2023 highs.

The big question for investors is whether the Bank of England has hit ‘peak rate’.

A lot of economists still think there’s one more 0.25% interest rate rise to come in June; then the pause button will be finally pressed.

Yesterday’s UK jobs data put that prediction in doubt.

Unemployment jumped unexpectedly whilst wage growth slowed. Not a good combo.

But the fact is the UK’s inflation rate remains stubbornly high.

The UK have the highest rate of inflation of any developed economy!

It’s basically forced the Bank of England to keep raising interest rates and cop the abuse.

The knock-on effect is the Pound has outperformed other major currencies in 2023, such as EUR, USD, AUD, CAD and NZD.

The real guesswork is how long the UK’s inflation rate stays higher than other countries? If you know the exact answer, please tell the folks at the Bank of England.

It’s only a matter of time before it begins to drop back.

For those looking to buy Euros and Dollars, you should consider taking advantage of the Pound’s current relative strength.

A note on the US Dollar – it’s being negatively impacted by debt ceiling fears and a fragile domestic banking sector. Be aware of heightened Dollar volatility and stay alert for opportunities.