Disappointment as the pound falls following interest rate rise

Disappointment as the pound falls despite interest rate rise

Currency Matters

Most people don’t pay much attention to the exchange rate unless they are about to move some money or go on holiday. If you are a Brit living in Spain you probably monitor it more than people in the UK but it affects everyone more than you would think, including those back home who don’t even travel abroad.

The pound crashed after the Brexit vote last year which made imported goods more expensive in the UK, increased inflation and led to yesterday’s UK interest rate rise – the first in a decade (the rate is now back at 0.5%). This has a small but direct impact on UK mortgages and businesses.

For those of you in Spain thinking that a rate rise would boost the pound (and the value of your UK pension into euros) there was disappointment as the pound actually fell sharply. Why? The market was expecting an interest rate rise but the comments from the Bank of England which followed their announcement suggested future rises will be gradual (the next is probably not until August /September 2018).

The pound’s unexpected fall after the announcement proves that no one, including us, can forecast what will happen. So you need to be very careful when exchanging large amounts of currency and protect yourself buy fixing the rate when it is good. Don’t ever try to be greedy as you will never catch the top of the market.

Catalonia: the euro fell against the US dollar and Swiss Franc after the recent “referendum” and Deutsche Bank have suggested “it is another example that politics is getting more extreme across the world”; let’s hope Spain resolves the Catalan crisis soon.



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