Two stories are moving markets this week. Andy Burnham is giving his first major speech as Labour leadership frontrunner, setting out a significant shift in how the country would be governed. And fresh tensions in the Middle East have rattled oil markets overnight. For anyone buying or selling property abroad, or with an international payment coming up, here is the full picture.
Latest market insights:
Pound to euro:
Sterling at a ten-month high against the euro
- It has been a positive week for anyone converting pounds into euros. The pound has reached its strongest level against the euro in almost a year, and the story behind that move is largely one of political relief.
- Several potential challengers to Andy Burnham have ruled themselves out of the Labour leadership race and backed him directly. That has raised expectations of a quick and smooth handover, removing a significant layer of uncertainty that had been weighing on sterling. Currency markets tend to react badly to prolonged political instability, so the prospect of a swift transition has been good news for the pound.
- This morning, Burnham is speaking in Manchester, where he is expected to set out his vision for a “No 10 in the North” and a significant transfer of power away from Whitehall to regional communities. It is his first major policy speech since the leadership contest began, and markets will be watching it closely.
- The key question is what he says about public spending and borrowing. The UK’s debt levels are already elevated, and bond markets are watching carefully for any sign that a Burnham government would loosen the current fiscal rules. If his speech includes clear commitments to financial discipline, the pound could strengthen further. If it contains signals of higher borrowing to fund regional investment, some of this week’s gains could unwind quickly.
What this means for you:
For anyone buying property in France, Spain, Portugal, or Italy, the pound is currently working harder for you than it has for most of the year. A ten-month high is a meaningful moment.
On a €400,000 property purchase, a 1% move in the exchange rate is €4,000, money that comes directly off your budget. With sterling at a ten-month high, this could be a good moment to think about locking in your rate. A forward contract with Lumon lets you fix today’s rate for a future payment. You do not need to pay the full amount upfront, just a deposit to secure the rate. Whatever happens in Westminster over the next few weeks, your budget is protected.
*Figures are indicative comparisons based on recent exchange-rate movements. Not live Lumon rates. Currency markets are volatile and rates can move quickly.
US dollar to euro:
The dollar is holding firm as peace talks wobble
- The situation in the Middle East shifted again over the weekend. The US and Iran agreed to pause fresh hostilities in the Gulf and resume talks in Qatar, following several days of retaliatory strikes. The ceasefire signed on 19 June had looked fragile, and this latest flare-up has served as a reminder of just how quickly conditions can change.
- For currency markets, the practical effect has been to keep the dollar well supported. The dollar typically strengthens during periods of global uncertainty, as investors move towards it as a safe store of value. Oil prices have also moved on the headlines, any disruption to supply through the Strait of Hormuz pushes energy costs higher, which feeds into inflation, which in turn affects central bank decisions.
- The euro has been caught in the crossfire. The European Central Bank raised interest rates in June, its first rise in three years, but ECB President Lagarde said this week that further rises are unlikely in the near term. That reduced some of the support the euro had been getting from the rate decision, and the stronger dollar has done the rest.
What this means for you:
If you have exposure to both the dollar and the euro, for example, receiving US dollars and converting into euros for a European property purchase, both sides of that equation are moving this week. The relationship between the two is worth watching, particularly given the events lined up later in the week.
Pound to US dollar:
Sterling is under pressure against the dollar
- The pound is down against the dollar compared to where it started June, and the reasons are coming from both sides of the pair.
- On the UK side, political uncertainty has weighed on sterling over the past few weeks, and weaker economic data has not helped. UK business surveys have pointed to a second consecutive month of contraction in the private sector — not a recession in itself, but a sign that the economic backdrop is fragile.
- On the US side, the Federal Reserve held interest rates steady in June but left the door open to further increases. Strong US employment figures and resilient consumer spending have given the Fed less reason to cut, keeping the dollar well supported across the board. The result is a rate environment that is more challenging than it was earlier in the year for anyone moving pounds into dollars.
What this means for you:
If you are sending money to the US, for a property purchase, school fees, a mortgage payment, or regular transfers, you are currently getting fewer dollars per pound than you were at the start of the year. The direction this week will depend heavily on Thursday’s US jobs report and what the central bank heads say at Sintra on Wednesday.
On a $500,000 property purchase, a 1.5% shift in the pound-to-dollar rate is roughly £5,500, money you could gain or lose before you have even picked up the keys. That is not a rounding error.
*Figures are indicative comparisons based on recent exchange-rate movements. Not live Lumon rates. Currency markets are volatile and rates can move quickly.
What to watch this week:
Tuesday 1 July:
- UK GDP figures for Q1 published
- A downward revision could add further pressure on sterling
Wednesday 2 July:
- Eurozone inflation data published
- Manufacturing figures released for the UK, eurozone and US
- Federal Reserve Chair, Bank of England Governor and ECB President all speaking at a central banking forum in Sintra, Portugal
- Any signals on future interest rates from any of the three could move markets quickly
Thursday 3 July:
- US jobs report for June released a day early, ahead of Independence Day
- A strong result would likely push the dollar higher
- A weak result could give sterling room to recover
Friday 4 July:
- US markets closed for Independence Day
- Lower trading volumes can lead to sharper moves on smaller news
- Worth having a plan in place before the end of the week
If you have an international transfer coming up in the next few weeks or months — for a property purchase, a pension payment, supporting family abroad, or any other reason — the events of this week are a useful reminder that exchange rates can move quickly, and not always in the direction you’d hope.
The good news is that you don’t have to simply wait and see what happens. Speaking with a currency specialist costs nothing and carries no obligation. They can talk you through your options — including spot contracts for transfers you need to make now, and forward contracts for transfers you’re planning further ahead — and help you understand how today’s rate movements might affect your specific situation.
Contact Lumon on +44 (0)204 506 5672 for a free, no-obligation conversation and discover what options you have available to help.
