The Pound has made considerable gains over the course of October, and Interbank levels are currently sitting at the highest levels seen since the end of September. This has meant an additional €7,500 on a £250,000 transfer when trading now compared to the lows of the month.
There are three main factors behind this excellent run for the Pound:
Firstly, since Bank of England Governor Mark Carney hinted towards the possibility of an Interest Rate hike at their next decision meeting in November, investors have reacted exceptionally well to this positivity.
Secondly, although at their latest meeting at the end of October the European Central Bank decided to decrease its monetary stimulus, seen as a positive sign for the European economy, it was the comments which followed by ECB President Mario Draghi that knocked investor confidence in the Euro. He said that Interest Rates would be kept on hold until far beyond the end of their stimulus programme, which is now set to run until at least September 2018, and they will be quick to increase stimulus once again if the economy shows any signs of weakening. All in all, this spooked investors who moved their funds out of the Euro, and into the Pound and US Dollar – therefore weakening the Euro.
Lastly, the ongoing situation regarding Catalonia has heaped further pressure on the Euro. Spain are struggling to contain Catalonia’s push for independence, and although this isn’t something which is likely to be granted, uncertainty of any kind can usually be detrimental to the currency in question.
The main event to watch out for now is this Thursday 2/11 where members of the Monetary Policy Committee will decide on whether to raise UK Interest Rates. One of the latest polls showed that there is an 84% chance that the bank will raise rates by 0.25%, bringing UK Interest Rates to 0.5%. However, as this is widely expected and therefore likely to already be priced to current exchange rates, if the bank either decide to keep rates on hold, or don’t raise by the expected 0.25%, we could see substantial losses for the Pound.
I would recommend any clients looking to buy or sell in France in the near future to get in touch, so that we can help you to put a plan in place for your future currency transfer. We can be your eyes and ears on the market during volatile periods such as these, and could save you thousands on your currency transfers by helping you to trade as any spikes occur.
Written by Amelia Spencer, Affiliate Relationship Manager at Foreign Currency Direct