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25 Eastcheap 2nd Floor
London EC3M 1DE
United Kingdom

+44 (0) 20 3880 0575

help@privalgo.co.uk

Office Hours
Monday - Friday
8:00am - 5:30pm

Last week was a turbulent one, to say the least. The Federal Reserve’s hawkish tone on interest rates skyrocketed the dollar and sent ripples throughout the currency markets. In this weeks discussion, Privalgo’s Currency Experts talk about this week’s Bank of England’s monetary meeting, the European Central Bank’s plans for future fiscal policy and more.

If you think you or your business will be affected by any of the subjects or events that are discussed in this article, get in touch with our Currency Experts. Together, we can discuss your currency requirements, any risks you may be exposed to and provide you with a competitive quote.

Brendan Leonard
Business Development Manager

It’s will they/won’t they time at the Bank of England this Thursday. Last week, the Federal Reserve’s posited a hawkish shift to its monetary policy, announcing they’d bring forward raising interest rates to 2023. The news strengthened the dollar and sent cable tumbling.

Now all eyes are on Thursday’s Bank of England meeting. Will it follow the Fed’s lead, or will they put off saying anything concrete? Pound sellers will be hoping for the latter.

Personally, I can’t see any big moves being made. UK inflation isn’t currently as severe as it is in the US. Over here, price rises have reached just over the BoE’s 2%, whereas on the other side of the pond it’s lurching up to 5%.

Disregarding Andy Haldane’s dissenting voice, Andrew Bailey and the other governors are likely to reiterate the message that inflation is transitory. As such, I can’t see the pound making any big jumps this week.

BLeonard@privalgo.co.uk
+44204 526 9787

Harrison Hickey
Business Development Manager

Last week was a tough one for sterling sellers. A bullish Federal Reserve meeting followed by not-great retails sales data on Friday meant that cable ended the week at lows of 1.379. Monday helped the situation slightly with improved sentiment in the stock market.

(The pound is viewed as a ‘pro cyclical’ currency. This means that it tends to rise in tandem with investor sentiment in the stock market.)

But Monday’s recent gains feel short-lived. With the lockdown reopening plans being delayed, and even talk of returning to harsher lockdown measures from public health experts, there’s a good chance that the wind may have been taken out of sterling’s sails.

This may be cause for concern for you if you trade in pounds. If this is you, get in touch. We can discuss any potential risks you or your business may be facing.

hhickey@privalgo.co.uk
+442045269789

John Hallahan
Business Development Manager

Last Thursday, the Federal Reserve announced its plans to bring forward interest rates hikes to 2023 (the previous target was 2024). The news sent the pound-to-dollar rate tumbling.

There may be more downside for sterling to come. Today, Fed Chair Jerome Powell appears on before the U.S. House of Representatives Select Subcommittee on the Coronavirus Crisis. It’s hinted that Powell could continue the tapering debate — slowing down the Fed’s $120 billion in monthly bond purchases.

Again, this would be to calm down the US’s fiery inflation numbers, which are heading towards 5% (the target is 2%).

If the Fed continues to tighten its monetary policy, while the Bank of England sits on its hands, there’s potential for pound-to-dollar to push down lower.

JHallahan@privalgo.co.uk
+442039221738

Patrick Oakland
Business Development Manager

Any euro sellers would have been disappointed by ECB president Christine Legarde’s talk yesterday. Nothing concrete was mentioned about any plans to reduce quantitative easing or tinker with interest rates. However, they did say that inflation won’t rise beyond 2%.

The only comment was that “good progress” was made in reshaping the ECB’s strategic goals.

On paper, this could have negatively impacted the value of the euro. In actuality, it wasn’t a market mover. EUR/USD seems to have found support at 1.1850.

Investors will now be focused on what the Fed has to say this week. Any further talk of future moves to tighten monetary policy will have repercussions across most major currencies.

POakley@privalgo.co.uk
+442081326561

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