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This weeks currency movements and swap rates

Market Rates

It’s not all doom and gloom for the British Economy

The National Institute of Economic and Social Research (NIESR), a leading UK think tank, stated that the economy is outperforming the Bank of England’s forecasts, with growth expected to accelerate from 1.7% this year to 1.9% in 2018, spurred by rising exports and business investment.

According to NIESR, 2017 represents a trough for UK GDP growth and will be followed by a “modest recovery that takes economic growth to a level that is close to potential”, with expectations for the first interest rate rise in more than a decade to occur early next year.

The Pound extended gains against the Dollar to an eleven month high of 1.324, up 2.18% in one month and 7.29% since the start of the year. The Sterling has been buoyed by strong manufacturing PMI data in July as exports surge due to post-Brexit currency depreciation and stronger global growth.

The cost of a five-year fixed rate loan has fallen 7 bps in one month to 0.83%, while the cost of a ten-year fixed rate loan dropped 5 bps to 1.21%. The latest moves leave the five and ten year rates up 8 and 7 bps respectively since the start of the year.

So what does this mean for businesses / investors looking for new finance?

Securing a £5m loan over a five year period is now £17k less expensive than it was a month ago. Similarly, cost of securing the same amount over ten years has gone down by £24k in one month. In other words, these swap / fixed rates do have a real impact on all of us.

You can keep track of key market rates by subscribing to our FREE market rate sheet. Updated daily, this concise summary covers swap rates (i.e. fixed rates for loans), FX rates and more.

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Author – Konstantin Gorev