Sterling holds its ground following new Covid-19 restrictions

23 September, 2020

Grace Smyth

Grace RaeWe saw rates drop at the beginning of the week over fears of a new nationwide lockdown, and the possibility of negative interest rates in 2021. Now we are mid-week with news that infection rates are surging in the UK and the Prime Minister made fresh Covid-19 restrictions which has been warned could last 6 months. Although no full scale lockdown was announced, investors continue to worry about the effect this will have for the already struggling UK economy, and overall the Pound had not fared well against its counterparts.

Although the pandemic has taken over new reports in recent weeks and months, its effect on the slowing economy is not the only looming event causing major concern.

The UK and EU are now in its closing weeks of negotiation ahead of the EU summit on the 15th October by which the UK wants a deal agreed. Talks are taking place in Brussels this week as both sides continue to work out how the relationship will look moving forward. Having no clear answer this close to the line is worrying as it could mean the UK ends the transition period without a deal. In this event the Pound is likely to be hard hit.

Given the current climate we could have expected rates to drop further against its majors following yesterday’s news however in the back ground it appears that Andrew Bailey – the Bank of England Governor, had made comments which seems to have toned down the prospect of negative interest rates in the future. (which had caused a stir for rates last week) Could these comments have helped the Pound remain fairly steady?

Not great news for those with Sterling in hand and the need to exchange funds in the near future. For those clients in the position of buying a home overseas with the completion date closing in or indeed our corporate clients who have outbound international payments to make, why not consider securing your currency requirements in advance using our forward contracts? This allows you to lock in at todays rates with just a 10% deposit for a future settlement date.  Meaning you wont have to worry about rates declining and can help you keep your costs under control.

The markets managed to close where in line with where they opened yesterday. But with lots of uncertainty paving the way, don’t get caught out by a unpredictable market and get in touch with our friendly team today to discuss your upcoming transfers. Our team can talk through the various options we provide to help you lock in your currency requirement and help you manage your transfer more effectively.