The coronavirus lockdown has resulted in a major decline for the global economy, with the UK being pushed into its first recession since 2011. However, more turbulence could lie ahead as Brexit trade talks rumble on.
In the past, the promise of a deal has provided a much-needed boost for the pound, meanwhile, the threat of a no-deal Brexit has seen sterling struggle to maintain its strength.
“The pound will, however, likely become increasingly driven by political developments in the coming days, as the latest round of post-Brexit trade talks continue in Brussels,” Michael Brown, currency expert at Caxton FX told Express.co.uk.
Though the Prime Minister’s spokesperson has shown positivity that a trade deal will be struck, suggesting it could be as soon as next month, EU leaders have so far rejected the UK’s demands – calling them “fundamentally unbalanced”.
Despite this, the pound saw some joy yesterday, climbing around and beyond the 1.1 handle for the first time in three days.
It seems that the positive boost has not survived though, with sterling once again plummeting.
The pound is currently trading at a rate of 1.1047 against the euro according to Bloomberg at the time of writing.
It has suffered a decrease of 0.16 percent overnight.
It is thought that yesterday’s short-lived boost could well be linked to the recent rise in UK inflation.
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“Data earlier this morning revealed that UK inflation unexpectedly jumped in July, which prompted the pound to spike higher,” George Vessey, UK currency strategist for Western Union Business Solutions told Express.co.uk.
“Consumer price inflation rose one percent from 0.6 percent in June, marking its highest rate since March and pouring cold water over hopes of further interest rate cuts by the Bank of England.
“The surprise rise in inflation beat all the forecasts in a Reuters poll of economists and is a result largely associated with the boost in fuel prices but even so, core inflation, which excludes volatile energy and food prices, also jumped 1.8 percent in July from 1.4 percent in June.
“The rise in inflation is expected to be short-lived though, as Bank of England policymakers predict inflation to turn negative next month due to the impact of government stimulus measures, such as temporary sales-tax cuts in the hospitality sector and subsidising restaurant meals.”
With travel corridors allowing Britons to jet off to certain holiday destinations, many people will be gearing up to purchase travel money.
Yet amid the ongoing fluctuations and political developments, it may be difficult to determine when is the best time to buy.
For Ian Strafford-Taylor, CEO of travel money specialist Fair FX, the key is never to leave changing money until the last minute.
“Travel restrictions are easing and many consumers are understandably excited to get back out and explore the wider world after months in lockdown,” he said.
“For those venturing abroad, there are many cheap flight and hotel deals to take advantage of but we’d urge holidaymakers not to waste those savings by leaving their holiday money to the last minute.
“Bureau de change desks at many airports remain closed as a result of the pandemic, meaning those who wait until they’re at the airport to get their travel money are left in the lurch, often having no choice but to use credit or debit cards on holiday instead,” said Mr Strafford-Taylor.
“Unfortunately, paying by credit or debit card overseas can open you up to a number of spending traps that can easily leave you out of pocket – especially if you haven’t planned to use your card abroad.
“The likes of overseas transaction fees, dynamic currency conversion (DCC) and fees for using an ATM machine while in a foreign country can soon add up.”
Holidaymakers should plan in advance and shop around to try and secure the most favourable exchange rate, he added.
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