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Short live Sterling recovery vs Euro and US Dollar owing to rising UK inflation levels (Tom Holian)

Wednesday, October 19, 2016 0:12
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Sterling has seen one of its biggest gains against both the Euro and the US Dollar yesterday as UK inflation came out higher than expected. Inflation rose 1% in September up from 0.6% in August according to the Office for National Statistics.

Clothing rose as well as fuel and it could be suggested that the price of the weak Pound could have been a key factor especially when you consider how much GBPUSD exchange rates have dropped since the vote to leave the European Union.

The rise in inflation is the biggest monthly increase since June 2014 and if this trend carries on this could really have a longer term impact on the UK economy. Indeed, if inflation goes above 2% then this starts negatively affecting income in real terms and if the Pound vs Dollar rate remains this low or drops even further then this is likely to increase the cost of a basket of goods.

The Bank of England deputy governor has even said earlier this week that the central bank are not too concerned with Sterling’s fall and with the Bank of England due to meet next month I think we could even see an interest rate cut coming next month.

Therefore, I think yesterday’s recovery for the Pound vs the Euro and the US Dollar is likely to be relatively short lived as the Pound is being mainly driven by political influences caused by Article 50.

If you’re in the process of buying a property in Europe before the end of the year then you may wish to consider buying a forward contract which allows you to fix an exchange rate for a future date.

Having worked in the industry since 2003 I am confident not only of offering you better exchange rates than using your bank when buying or selling Euros but also help you with the timing of your transfer.

If you would like further information or for a free quote then contact me directly and I look forward to hearing from you.

Tom Holian

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