This month has shown how volatile the markets can be and catch anyone unawares and turn their lives upside down. Following the Scottish referendum in Scotland the pound rallied in response the “no” result only for it to be hit by unexpectedly low inflation numbers. The fall from 1.5% to a five year low of 1.2%, mainly as a result of the continued fall in oil prices, has had a knock effect as it immediately sounds the death knell to any change of an interest rate hike in the UK until 2015. This has sent sterling into free fall as the markets were looking for a rise in rates as soon as this quarter 2014.
However falling Sterling will be welcomed by British companies that do business abroad as two companies today have announced a hit in their profits due to the strength of the Pound. Michael Page announced that even though their gross profits had grown by 11.6% once exchange rates, converting foreign earnings back into Sterling, their gross profit as actually 4.7%. This has resulted in a drop in their share price of 7.6%.
Mulberry is another company that has been hit by their success abroad as exchange rates negatively impact their earnings.