Why British travellers to the US this summer will be getting more bang for their buck - James Eades

But, despite market uncertainty, the benchmark quickly rebounded on the back of Opec’s announcement with oil majors such as Shell and BP rallying as restricted supply will likely push oil prices up, benefitting profit margins. However, while the tightening of output levels may benefit the oil industry, the squeeze in supply could also challenge governments and their central banks who continue to tighten monetary policy in a bid to cool inflation.

While it is unclear what the longer-term effects of the announcement

might be, it is possible that restricting supply could have inflationary consequences, particularly on the supply side, as manufacturers that rely on oil to power machines could experience rising input costs. Therefore, given that central banks such as the Federal Reserve (FED) have behaved aggressively over the last year in an attempt to slow inflation, it is quite possible that the Fed’s job may have just become a little more complicated.

Good news! If you are planning on travelling to the US this summer, you may be pleased to know that you’ll be getting more bang for your buck now than you would have had over the last 10 months. During the first quarter of 2023, the pound has been the best performing developed market currency after rallying 3.3% versus the dollar. One of the driving forces behind the pound sterling’s growth is a series of better-than-expected economic data reports, defying expectations that the economy entered into a recession over the first quarter of 2023,

distilling some level of market confidence. The pound has also benefitted from a decline in the dollar’s value over recent months, as the U.S. Dollar Index, which tracks the dollar against six other currencies, including the euro and the Japanese yen, slipped more than 10 per cent from a record high reached in September. The weakening dollar is likely a reflection of the health of the US economy, as the country continues to slow, with recent declines in manufacturing and construction spending aided by the effect of the Fed’s continued efforts to raise rates and tighten activity within the economy. With the British pound strengthening, it isn’t just holiday makers that may benefit, UK businesses that import goods into the country and manufacturers with supply chains overseas are also likely to be at an advantage, as the purchasing power of the pound will increase.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. The value of investments and any income derived from them may go down as well as up and you could get back less than you invested.

James Eades, Investment Research Team, Redmayne Bentley