The Pound had one of the most positive weeks in a long time as it brushed into the 1.15’s against the Euro for the second time this year, reaching a multi month high. For those looking to purchase Euros this was a rare opportunity and within 1 hour of the jump on Thursday the GBP/EUR exchange rate fell back below 1.15.
Today we have seen the GBP/EUR rate remain in the mid 1.14’s, whilst against the US Dollar Sterling is back at the high of yesterday. The Brexit transitional deal with the European Union adds that little bit of confidence for businesses and citizens alike essentially meaning little will change now until 2021.
Bank of England interest rate hike
This week the Bank of England Monetary Policy committee voted 7-2 to keep the current interest rate the same. There was some analysts suggesting there might be a rate hike this month, evidently that was not to be the case. However, the fact there was a split vote does provide confidence for the next vote in May, which could see more members vote for a rate hike.
Inflation will also have a significant bearing on what the Bank of England chose to do. The BoE were going to be forced to act as inflation sky rocketed meaning the rate hike would have slowed things down. However, naturally inflation has begun to fall, but does still sit above the Bank of England’s 2% target. This means a rise in the interest rate wasn’t vital, but in the next few months I would be surprised if there wasn’t another hike on the cards.
Average wage growth has also moved closer to inflation meaning consumers are not seeing wages decrease whilst the costs of goods increase. Essentially, Sterling could be moving into a positive period as some of the economic worries following Brexit appear to be decreasing.