Sharing Currency Insights
04 November 2024
"Though a rate cut could stimulate growth in a challenging environment, and some analysts are predicting that the Monetary Policy Committee will lower the base rate by a quarter-point to 4.75%, there are concerns that the new government’s first Budget may push up inflation. Recent data showed a drop in the headline inflation rate to 1.7%, the lowest since April 2021, and easing wage growth. The Bank of England cut rates in August but held them steady in September. However, following the Budget fallout, inflationary pressures could complicate the decision. While there are arguments for a cut, the inflation risks from the Budget should lead the Bank to prioritise price stability over growth. Ultimately, they will need to balance the potential benefits of a rate cut against the risks of rising inflation expectations. All eyes will be on how they navigate these priorities."
31 October 2024
"Yesterday’s Budget signals continued public sector expansion without reform, supported by £170bn in new borrowing and £40bn in increased taxes on productive sectors. This comes just 2 months after Keir Starmer emphasised growth and wealth creation. The Budget imposes austerity on the private sector, leading to higher inflation, increased borrowing and the highest overall tax burden since 1948. The bond markets are reacting negatively, with 10-year gilt yields rising 9 basis points to an 11-month high following the Chancellor's speech. In currency markets, the Pound may hold its own against the Euro as the expectation is for the Bank of England to maintain higher interest rates longer than the European Central Bank but this is very dependent on what happens next in the bond markets."
24 October 2024
"The drop in UK private sector growth to an 11-month low is significant. This PMI report reflects deep and growing concerns among businesses ahead of the Budget. Geopolitical tensions in the Ukraine and Middle East, coupled with the upcoming US elections on 5 November further compound this uncertainty. As business confidence is crucial for investment and spending, this hesitancy could see a continued impact on UK economic growth."
25 September 2024
Also commenting on the exchange rate was Tony Redondo, founder of Cosmos Currency Exchange, who said: 'The British Pound is enjoying its 'moment in the sun'. It's trading at its highest level against the US dollar since March 2022.
'This is mainly being driven by interest rate differentials. Last Friday's retail sales and Monday's PMI (Purchasing Managers' Index) data indicate the UK economy is too robust for the Bank of England to entertain rapid interest rate cuts ..."
