Currency
The US Dollar (USD) is trending higher against the Pound (GBP) as geopolitical uncertainty underpins the safe haven currency.
Jane Foley, head of FX Strategy at Rabobank noted; “Sterling is poised to be stronger versus the single currency during the Ukraine crisis. This is because Germany’s greater reliance on Russian energy has increased the downside risks for the euro zone. However, against the dollar, much will depend on investor’s appetite for the safe-haven currency.”
As the Ukraine crisis escalates, it’s likely to bolster inflationary pressures in UK. Energy supply concerns have propelled oil and gas prices sharply higher. The jump in prices at the pump is a major concern for GBP investors. Many fear it could exacerbate the UK’s cost-of-living crisis and stifle economic activity.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Already petrol and diesel have hit fresh highs at the pumps causing yet more pain for consumers already caught in the grip of the cost-of-living crisis.”
Streeter continued “The extra pounds on bills are piling up for hard hit families. With the increase in fuel, energy and grocery bills set to hit lower income households harder as a higher proportion of their outgoings will be spent on travel costs.”
Further weighing on the Pound’s appeal are easing expectation for a March interest rate hike from the Bank of England (BoE).
Key GBP/USD Statistics:
- Looking ahead, the Russia-Ukraine war may continue to infuse volatility into the Pound US Dollar exchange rate.
- The best British Pound to US Dollar exchange rate of the year to date was 1.4247 achieved on 02-06-2021.
- Today’s exchange rate is at 1.3292, this is 6.71% off the best exchange rate of the past year-to-date.
- The best British Pound to US Dollar rate of the last month was 1.3643, today’s conversion is 2.58% off that rate.
Production & Freight Update
The Russia/Ukraine crisis has been dominating news headlines. The ramifications of Russia’s act of war and the sanctions that have followed are starting to be felt across the global supply chain. The UK has banned port access to any Russian linked vessel, including anything Russian-flagged, registered, owned, controlled, chartered, or operated.
Goudsmit UK can confirm that we neither directly nor indirectly purchase or plan to source raw materials from either of these regions for use in, or the process of manufacturing any of our products, and have no current vessels in transit affected by the port access ban.
The ocean freight issues remain in the background. Labour shortages, ongoing consumer spending, rising e-commerce demand, driver shortages and blank sailings all combining to keep freight rates elevated. Ocean ports remain congested and unable to accommodate many of the ships that need to load/unload. Therefore, leading to lengthy port delays after arrival.
With regards to airfreight, the Russia/Ukraine crisis and subsequent airspace restrictions imposed by many countries, are forcing many airlines to cancel or adjust their services. The price of fuel is also on the rise. Increased transit times and airfreight rates are inevitable.
The on-going issues caused by the pandemic remain, with belly-capacity still remaining below pre-Covid levels. With no certainty on potential future variants and ever-changing travel restrictions, it’s likely that pressure will remain on the capacities and rates for the foreseeable. Mads Ravn, vice president at forwarder DSV and head of the DSV Air Charter Network, believes: “Most origins have peaked in quarter four last year, so rates will not go higher but, overall, they will not drop significantly either.”
The global cargo industry is hoping that the Omicron variant will see the end of the pandemic. However, unfortunately there are still so many unknowns. Communication and flexibility will remain the key to managing the current market conditions.
Goudsmit UK
Goudsmit UK continue to communicate with all customers proactively, managing expectations and providing multiple solutions. Thus, allowing our customers to make conscious decisions when balancing cost versus supply chain risk.
We continue to advise all customers at the point of quotation and order confirmation of the extended lead times so that they can be factored in when planning. We would request that you review your current requirements and advise of any issues asap. Moreover, we’d urge you to review your requirements for 2022 – 2023 at the earliest opportunity.
Whilst freight delays are unavoidable at this time, we are working with our customers by holding larger volumes of UK stock for longer and would encourage that a minimum of 8-10mths of buffer stock is considered when re-ordering new production to help reduce the impact of freight delays and lessen the potential requirement for costly airfreight.
