INVESTMENTS & PENSIONS
In recent years , markets across all sectors have been heavily impacted by a plethora of global , political , economic , and pandemic events . In turn , investments , risk appetites , interest rates , inflation , property markets and more have been affected worldwide making clients open and vulnerable to volatile markets .
2024 so far has been relatively calm in comparison to the previous years , however this is not to say that investors and those exposed to foreign affairs shouldn ’ t be well equipped for sudden or even gradual but considerable movements .
CURRENCY OVERVIEW
The big market mover over the past month , both in FX and other financial markets , has been the reduction in expected interest rate cuts from the US Federal Reserve this year . In January , the market was pricing in US interest rate cuts of between 1.0 and 1.5 % this year , while now we expect less than 0.5 % in cuts . That change in expectation makes the US dollar more attractive to invest in over the course of this year and therefore the US dollar index has strengthened close to highs we saw in 2023 . This contributed heavily to GBP / USD dropping to 1.2301 in April .
With a host of US economic data points beating expectations and with the US election coming up in November , the reality could be even less than 0.5 % in interest rate cuts this year and this narrative , if it grows , could push USD even stronger through the next 6 months . The US CPI inflation figure on 15th May could again be the driver of USD volatility mid-month .
In May , amongst the usual monthly releases of high impact economic data , which you can see in my Risk Event Calendar below , we have a whole raft of central bank meetings over the coming weeks to look forward to . Most notably , the US Federal Reserve ’ s FOMC meet tonight and the Bank of England ’ s MPC meet on Thursday 9th May .
The Bank of England are currently expected to cut interest rates this year from the current 5.25 %, by circa 0.50 % to 4.75 %, but no rate change is expected on 9th May . However , as we have seen from the US interest rate expectations , this can change very quickly dependent on economic data releases , and can quickly have a knock-on effect in FX markets . UK CPI inflation dropped to 3.2 % in March ( released in April ) and we get the next reading on 22nd May . This figure especially which will be watched very closely by the markets and the Bank , and could cause some GBP volatility in the second half of the month .
WHO DOES THIS EFFECT ?
It is essential for you and your clients to know just how important it can be in both protecting your funds from negative market movements , as well as potentially maximising your exchange through a variety of FX tools and expertise .
If you have a client exposed to one of the below ( Corporate or Private individual ) then you should certainly be advising them to be receiving expert and free guidance from a specialist .
- Buying / selling property overseas - Being paid in a foreign currency - Pension transfers - Inheritance from overseas - International Probates - Sale and purchase of shares in another currency - Business FX flow
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