Inflation, inflation, inflation. This will probably be the main topic for the currency markets this morning as the UK release their most recent figures. It will be highlighted and probably covered in the national papers as it could have a large knock on affect on interest rates currently at a record low. Inflation came out last at 3.3% well above the 2% target by the Government. Many think that due to both the VAT rise, plus fuel and food costs climbing this figure will probably climb again. The most recent estimates are that the BOE will wait till May to see whether inflation will fall “naturally,” before raising interest rates to help. The BOE are currently running a very thin balancing act as raising interest rates normally lead to job losses, and doing more quantitative easing, even though it will help with job creation normally raises inflation. So this release could have a large effect on foreign currency.
To summarise, if you are looking at sending money abroad in the short term you may wish to move now, in the long term towards summer with potential interest rate raises many would expect exchange rates to rise also.
In other news, worth noting that GBPUSD has reached a 8 week high. People are moving money from the US into the euro making the dollar cheaper to buy as a result.
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