Which factors and events could impact the pound?
The currency markets are constantly moving and in these turbulent times, it’s impossible to predict which events will have an impact on the pound. However, we can still pinpoint some key factors that have the potential to move sterling in the coming weeks, months and years.
With nationwide restrictions introduced and local lockdowns continuing to be enforced, the markets will be looking out for signs of how this has affected the UK economically. The pound could react to significant economic news and respond to the overall view of how the global economy is coping. Economic data and speeches from Bank of England officials, as well as the minutes from the BoE’s monetary policy meetings, will give a good indication of how the economy is faring.
Bank of England
Actions from the Bank of England itself can also have an impact on the pound. In upcoming monetary policy meetings, any suggestion that interest rates could be cut or any decisions to increase financial aid for the UK economy could have an impact on the pound. Comments or speeches from key officials, such as Governor Andrew Bailey, could also affect sterling, especially if surprise statements are made.
News from Europe and the US
News from Europe and the US has the potential to influence the euro and dollar, which, in turn, affects the pound’s position. Any news surrounding Joe Biden’s new agenda as President could affect the greenback’s position in the coming weeks and months. News of how the European economy is coping with the pandemic will also be something to watch. Rising infection rates could continue to have an impact on the European economy and the euro in the coming weeks and months.
Brexit has been a key driver of the pound ever since 2016 and it could continue to have an impact, even once the transition period is over. Talks are still ongoing between the EU and UK and it’s hoped that a ‘skinny’ trade deal will be achieved soon. At the beginning of next year and beyond, we will start to see changes with overseas trade as well as possible effects on businesses.
News concerning COVID-19 and finding a vaccine could also impact the pound. Any positive developments surrounding this could strengthen sterling, whilst any setbacks have the potential to weaken the pound. Significant changes to infection rates and death rates in the UK could also influence the pound’s movements.
Your next move?
The outcomes of the above events are unpredictable, so it’s impossible to know how the pound will fare. As complex as the currency exchange market is, however, there are simple ways to help property buyers to purchase their dream home abroad safely.For most, the solution is a forward contract. Essentially, it means that you lock in the same exchange rate for up to twelve months, so any drop in the rates does not affect you.
*The opinions and views expressed in the above articles are those of the author only and are for guidance purposes only. The authors disclaim any liability for reliance upon those opinions and would encourage readers to rely upon more than one source before making a decision based on the information.
Ref: FP1408 – 2020