World Markets

Currency Market Update: British Pound Falters, Euro Wobbles, and U.S. Dollar Steadies Ahead of Key Data

Posted on by Will R

The British Pound continues to struggle, failing to build momentum despite modest gains in recent trading. Market sentiment remains cautious, with many investors convinced that the Bank of England (BoE) may soon accelerate its rate-cutting cycle. As the UK data calendar stays light for now, all eyes are on the upcoming Bank of England Monetary Policy Report Hearings scheduled for tomorrow, followed by the release of critical GDP figures on Friday. Both events are expected to shape the BoE’s direction and could lead to further volatility for the Pound.

Meanwhile, the Euro faced challenges during yesterday’s session, wobbling due to a lack of new economic data across the European Union. The single currency has lost over 2% against the U.S. Dollar since hitting a multi-year peak in late September. With the European Central Bank (ECB) expected to announce another rate decision next week, traders are in a wait-and-see mode. The economic calendar remains quiet until then, but the market is keeping a close watch on the ECB’s policy direction as it navigates the bloc’s economic landscape.

The U.S. Dollar remained relatively stable in Asian trading, holding near a seven-week high reached earlier this week. Traders are eagerly awaiting the release of the Federal Reserve’s September meeting minutes, expected later today. These minutes will provide deeper insights into the Fed’s decision to cut rates by 50 basis points and may hint at the central bank’s future plans. Additionally, this week’s inflation data will likely play a key role in shaping the Fed’s economic outlook, influencing investor sentiment in the coming days.

As the currency market looks ahead to pivotal data and central bank actions, traders and investors are bracing for potential shifts in the forex landscape. Keep an eye on these developments as they unfold throughout the week.

Currency Market Update: British Pound Hits 29-Month High, Euro Struggles, and U.S. Dollar Gains Interest

Posted on by Will R

The British Pound (GBP) has rallied to a 29-month high against the Euro, bolstered by expectations that the Bank of England’s (BoE) approach to easing monetary policy will be more measured compared to other G7 central banks. The prevailing sentiment is that the BoE will only cut interest rates one more time by 25 basis points before the year ends, providing a strong foundation for the pound’s continued growth. This slow and steady approach to policy adjustment has helped the GBP maintain its strength in the face of global economic uncertainty.

Meanwhile, the Euro (EUR) has been struggling to gain traction. Investors have taken a cautious approach, holding back on placing significant bets ahead of today’s release of Eurozone inflation data. The report is expected to reveal that inflation in the Eurozone fell below the European Central Bank’s (ECB) 2% target for September. If the inflation data is softer than expected, it will likely reinforce market expectations of a 25-basis-point rate cut at the ECB’s next policy meeting in October.

Across the Atlantic, the U.S. Dollar (USD) has been showing renewed strength following a more hawkish tone from Federal Reserve Chair Jerome Powell. During a speech, Powell indicated that he anticipates two additional 25-basis-point rate cuts this year, assuming the economy continues to perform as expected. Investors quickly reacted, adjusting their expectations and reducing bets on more aggressive easing by the Fed. This shift in sentiment has sparked interest in the USD, further stabilizing its position in the global market.

Overall, the currency market remains dynamic as central banks across major economies continue to navigate their monetary policies amidst evolving economic conditions. Keep an eye on upcoming data releases and policy meetings, as these will play a crucial role in shaping the direction of the GBP, EUR, and USD in the months ahead.

Currency Market Update: British Pound, Euro, and U.S. Dollar Performance

Posted on by Will R

The global currency market continues to reflect the economic conditions of major economies, with the British Pound, Euro, and U.S. Dollar all showing movement based on recent data releases and central bank actions.

British Pound Holds Steady Despite Mixed UK Services PMI

The British Pound remained relatively subdued during yesterday’s trading session following the release of the UK’s services PMI. While the growth in the UK’s key services sector was more modest than expected, the index still pointed to underlying strength. This helped limit the Pound’s losses, as the data suggested moderate growth overall, offering some stability to the currency in the face of economic uncertainty.

Euro Struggles as German Business Activity Contracts

The Euro faced additional losses yesterday after data revealed a significant contraction in German business activity. The September figures showed that business activity in Europe’s largest economy declined at its sharpest pace in seven months, raising concerns that Germany may have slipped into recession. The growing signs of economic weakness could increase the likelihood of another rate cut by the European Central Bank (ECB) in October, which would put further pressure on the Euro.

U.S. Dollar Rebounds After Fed Rate Cut

The U.S. Dollar has bounced back somewhat after the Federal Reserve’s significant rate cut last week, as investors appear less concerned about the risk of a U.S. recession. While the Fed’s easing cycle initially caused a selloff, investor sentiment has improved, and market participants are now pricing in 75 basis points of further rate cuts by the end of the year, with nearly 200 basis points in cuts anticipated by December 2025. This outlook has helped the Dollar recover, signaling a more optimistic view of the U.S. economy moving forward.

As global economic data continues to unfold, the currency market remains highly sensitive to shifts in growth, central bank actions, and investor sentiment. With the British Pound showing resilience, the Euro facing headwinds, and the U.S. Dollar in recovery mode, traders and businesses alike will be watching these developments closely to gauge future currency movements.

Currency Market Update: British Pound, Euro, and U.S. Dollar Movement

Posted on by Will R

In a dynamic global market, currencies are always on the move, and recent developments have put the British Pound, Euro, and U.S. Dollar in the spotlight.

British Pound Edges Up as Investors Await BoE Decision

The British Pound saw a slight rise during yesterday’s session as anticipation builds ahead of Thursday’s Bank of England (BoE) policy meeting. After a 25-basis point (bp) reduction in August, the BoE is expected to maintain its key interest rate at 5%. This decision could mark a pause in the easing cycle as investors closely monitor the central bank’s stance on inflation and economic growth. In the absence of significant UK economic data, the Pound’s movement may remain linked to broader market sentiment, with all eyes on Thursday’s rate decision.

Euro Consolidates Following ECB Rate Cut

The Euro seems to be consolidating its recent gains after last week’s European Central Bank (ECB) rate cut. ECB President Christine Lagarde recently cooled expectations for another rate cut in the near future. She emphasized that the central bank will make decisions on a meeting-by-meeting basis, without pre-commitments, leaving the door open for adjustments depending on future economic data. This cautious approach is aimed at balancing inflation control while supporting economic recovery across the Eurozone.

U.S. Dollar Under Pressure as Rate Cut Looms

The U.S. Dollar faced downward pressure as expectations build for the Federal Reserve to cut interest rates by 50 basis points at tomorrow’s meeting. Investor sentiment is strongly pointing towards an easing cycle, with a 68% probability of a 50 bp cut and a 32% chance of a smaller 25 bp cut. The Federal Reserve’s anticipated rate cuts could accumulate to 100 basis points by the year’s end, as the central bank responds to signs of a slowing U.S. economy.

Looking Ahead: Market Sentiment and Central Bank Policies

As investors await key policy decisions from the Bank of England, European Central Bank, and Federal Reserve, the direction of major currencies like the British Pound, Euro, and U.S. Dollar will remain closely tied to central bank actions and market sentiment. With no major UK data releases expected before Thursday, the Pound’s performance may hinge on market speculation surrounding the BoE’s rate path. Similarly, the Euro and U.S. Dollar will be influenced by the evolving stance of their respective central banks as they navigate an uncertain global economic landscape.

Stay tuned as we follow these key events shaping the currency markets.

Market Update: Sterling, Euro, and U.S. Dollar Performance in Focus

Posted on by Will R

Yesterday, the British Pound traded without a clear directional bias, largely due to the absence of any significant UK economic data releases. This left the Pound vulnerable to prevailing negative risk sentiment throughout the day. However, today’s session started on a more promising note with the release of the UK’s latest jobs report. The data revealed a further decrease in unemployment for July, which helped offset concerns over a slowdown in wage growth during the same period. This balancing act between lower unemployment and softer wage increases has provided some stability for Sterling.

Meanwhile, the Euro experienced slight losses, primarily driven by its inverse relationship with the U.S. Dollar. Investors in the Eurozone remain cautious ahead of the European Central Bank’s (ECB) interest rate decision, expected later this week. In the background, confirmation that German inflation slowed significantly last month has added downward pressure on the Euro, acting as a potential headwind in today’s session.

Over in the U.S., the Dollar inched higher as traders look ahead to critical inflation data set to be released on Wednesday. Expectations are that the report will show a continued cooling of inflation through August, a development that could shape the Federal Reserve’s upcoming interest rate decision. With the Fed widely expected to cut rates by 25 basis points next week, this inflation reading will be a key factor in guiding market sentiment.

Stay tuned as these key events unfold, which are likely to impact the market in the days ahead, particularly with central bank decisions looming in both the Eurozone and the U.S.

Sterling Gains Momentum Despite Budget Warning

Posted on by Will R

The British Pound showed a notable increase in value during yesterday’s trading session. Despite a cautionary note from Prime Minister Keir Starmer that the government’s Autumn Budget would be “painful,” investors remained largely undeterred. The Pound’s recent upward movement appears to be bolstered by comments from Bank of England (BoE) Governor Andrew Bailey, who has tempered expectations for imminent interest rate cuts. With limited UK economic data available, the Pound is likely to maintain its positive trajectory as long as investor sentiment continues to adjust their rate cut forecasts.

Eurozone Woes as German Economy Falters

In contrast, the Euro experienced a subdued trading session following the release of Germany’s finalized GDP figures for the second quarter, along with the latest GFK consumer confidence index. Although the lackluster performance was anticipated, it has reignited concerns about the health of the Eurozone’s largest economy. As a result, EUR exchange rates have remained relatively flat, reflecting the ongoing apprehension about the Eurozone’s economic outlook.

U.S. Dollar Gains Amid Geopolitical Tensions

The U.S. Dollar saw modest gains yesterday, driven by increased safe haven demand amid escalating geopolitical tensions in the Middle East, Libya, and Ukraine. However, the Dollar’s gains were somewhat capped as investors remain focused on potential U.S. interest rate cuts. Federal Reserve Chair Jerome Powell’s recent Jackson Hole speech, which signaled the likelihood of such cuts, continues to shape market expectations.

Overall, while the British Pound benefits from easing rate cut expectations, the Euro faces challenges from weak economic indicators, and the U.S. Dollar’s advance is tempered by ongoing rate cut speculation.

Ructions & Turmoil

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GBP: The British Pound saw a volatile week of trade and opens this morning’s session relatively flat as chaos amongst US and European banks led to readjustments of bets on further monetary tightening from all central banks. In fact, UK stock futures point to a weaker opening than other European markets as investors and traders see some contagion risks in the UK. However, the pound seems to be holding up surprisingly better than other G10 peers this morning. Looking forward, the Bank of England will announce their monetary policy decision on Thursday. While market participants expect a 25-basis point rate hike, it’s closer to a 50/50 call in the current highly volatile environment. Ultimately, market implied probability of a hike is 57% at the time of writing, although a big GBP rally may be prevented by policymakers strongly signalling a pause.

EUR: The Euro started this morning’s trading session on the back foot as investors try to understand whether major central banks will be able to contain the global financial and banking crisis. Over the weekend, UBS Group AG has agreed to buy Credit Suisse Group AG and will reportedly pay $3.23 billion for Credit Suisse, a fraction of its closing market value on Friday. Moreover, the Federal Reserve announced that it will restart offering daily swaps to the Swiss National Bank and the European Central Bank to assist with additional liquidity needs. Although these developments helped the market mood improve, safe-haven flows seem to have returned. Ultimately, investors might be assessing the latest action taken by major central banks as a sign that the liquidity issues could be deeper than initially thought.

USD: The U.S. Dollar rose slightly this morning as markets hunkered down on mounting fears of a banking crisis that has kept sentiment on edge for the past couple of weeks. However, market participants seem cautious over the greenback ahead of the Federal Reserve meeting this week, where the bank is expected to hike rates by 25-basis points. In fact, recent ructions in the banking sector saw markets betting that the Fed will soften its hawkish rhetoric to prevent further economic pressure from high interest rates. Although the Fed, along with other major peers, rolled out emergency liquidity measures over the weekend to support the banking sector and prevent further collapses, markets still remain on edge over more pain from the banking sector. Ultimately, traders are now uncertain over what signals the Fed will send to markets, given that its recent liquidity measures undermine a year-long struggle to tighten monetary conditions and fight inflation.

Dollar King… Again?

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GBP: Sterling was a middling performer among major currencies last week as recent economic data suggests that the Bank of England may become slightly less aggressive when deciding on the future path of UK interest rates. Growth in the UK has flatlined, the jobs market remains strong, retail sales remain poor but marginally better-than-forecast, while core inflation is falling. This has lead many investors to believe that the BoE may decide that UK interest rates are starting to work and that they should be wary of making interest rates too restrictive. For now, the UK bank rate, currently at 4%, is seen topping out at 4.5% with a potential rate cut at the December meeting now starting to be priced in. Nevertheless, the British Pound may get a marginal boost in the coming days if market talk of an impending Brexit deal proves correct. In fact, UK PM Rishi Sunak is said to be in talks with the EU over an imminent deal on the Northern Ireland protocol.

EUR: The Euro started today’s session relatively flat, with investors cautious at the start of a week that includes the release of important Eurozone activity data as well as the minutes from the last Federal Reserve meeting. Today’s U.S. holiday is likely to limit trading volumes in Europe, but investors will also be wary of taking strong positions ahead of some important regional economic data. The highlight of the week will be tomorrow’s flash PMI data for February, which will show how well the Eurozone economy is performing after unexpectedly growing in the final quarter of 2022. Germany’s IFO Business Climate Index on Wednesday will show how the region’s largest economy is weathering the energy crisis, while the bloc is also to release final inflation figures for January on Thursday.

USD: The dollar was on the front foot this morning, supported by a strong run of economic data out of the United States that traders bet will keep the Federal Reserve on its monetary policy tightening path for longer than initially expected. However, trading is likely to be thin today, with U.S. markets closed for Presidents’ Day. Nevertheless, a slew of data out of the world’s largest economy in recent weeks pointing to a still-tight labour market, sticky inflation, robust retail sales and higher producer prices, have raised expectations that the U.S. central bank has more to do in taming inflation, and that interest rates would have to go higher. In fact, markets are now expecting the Fed funds rate to peak just under 5.3% by July. Moreover, hawkish comments from Fed officials have also underpinned the U.S. dollar, as they signalled interest rates would need to go higher in order to successfully quash inflation.

Renewed Pressure

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It’s set to be a much quieter week on the economic calendar, but there’s still plenty for markets to mull over after last week’s slew of Central Bank hikes and Friday’s unexpectedly strong U.S. nonfarm payrolls report. In fact, data in the Eurozone and the U.K. will be closely watched.

GBP: The British Pound stumbled out of the gates last week as a lack of UK economic data and a downbeat market mood left Sterling vulnerable to losses against the US Dollar and the Euro. In fact, stronger headwinds hit the Pound as the week went on. Public-sector strike action continued to intensify and company insolvencies hit their highest level since 2009. Furthermore, markets expected the Bank of England to hint at an end to its tightening cycle at its Thursday meeting, and they were proved right. The BoE hiked rates by 50-basis points but signalled it may raise rates in smaller increments, if at all, in future meetings. Looking forward, UK economic data is in short supply through much of the week. As a result, the increasingly risk-sensitive Sterling could be primarily influenced by market mood through much of this week’s trade. Domestic news could also impact GBP. More downbeat headlines about the UK economy, worries about intensifying strike action, or political scandal and instability could add to a general sense that the UK is in a challenging situation, which may make Sterling a less attractive investment.

EUR: The Euro found some support this morning as Eurozone’s largest economy recorded monthly growth in its factory orders of 3.2% in December, a rebound from the revised slump of 4.4% the previous month. However, looking at the week ahead, the Euro could face selling pressure early on. Economists expect Eurozone retail sales to have slumped in December, with a forecast decline of 2%. This could raise concerns about a potential Eurozone recession, thereby denting EUR exchange rates. Moreover, a forecasted contraction in German industrial production on Tuesday could add to EUR’s woes. Ultimately, Germany is the largest economy in Europe, and manufacturing is a key part of the country’s economy. Signs of declining activity could add to Eurozone recession fears.

USD: The dollar held firm this morning after Friday’s strong U.S. jobs report suggested the Federal Reserve could stay hawkish for longer. In fact, the U.S. Labour Department’s closely watched employment report showed that nonfarm payrolls surged by 517,000 jobs last month; economists in a Reuters poll had expected a gain of 185,000. Consequently, the Dollar Index strengthened 1.1% against a basket of currencies, touching a 4 week high of 103.22. The Fed on Wednesday raised rates by 25-basis points and said it had turned a corner in the fight against inflation, leading investors to price in a more dovish path going forward. However, the eye-popping payrolls number along with U.S. services industry rebound in January have investors questioning whether the Fed is almost done with its monetary tightening policy.

Rising Rates

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It’s set to be an action-packed week as three of the world’s largest central banks hold policy meetings. While the Federal Reserve is expected to slow the pace of interest rate hikes, the European Central Bank and the Bank of England are both expected to hike rates by 50-basis points.

GBP: The BOE, the first of the major central banks to begin hiking rates, is expected to deliver its tenth rate hike since December 2021 on Thursday. Officials are widely expected to raise rates by 50-basis points to 4%. Headline inflation moderated in December to 10.5%, but it’s still over five times the Bank’s official target and wage growth remains persistently high. Ultimately, market watchers will be looking out for indications of whether policymakers think they are near the end of their tightening cycle. Moreover, money markets are currently expecting one final 25-basis point hike in March, which would take the Bank Rate to a peak of 4.25%.

EUR: A rate hike of 50-basis points to 3% from the ECB when it meets on Thursday looks like a done deal – but what happens next remains unclear. Market watchers will be on the lookout for indications of how much further and how fast officials intend to go. ECB President Christine Lagarde will likely remain hawkish as core inflation remains stubbornly high, despite growing dissent among policymakers, with more dovish voices arguing that inflation has retreated from record highs. Policy hawks are pushing for more of the same in March, with inflation still well above the ECB’s 2% target.

USD: The dollar distanced itself from an eight-month through, ahead of a slew of central bank meetings this week, though gains were capped by dovish repricing of the U.S. Federal Reserve’s rate-hike expectations as compared to more hawkish counterparts. Market watchers are widely expecting a 25-basis point rate increase on Wednesday to a range of 4.5% to 4.75%, slowing the size of the increase for a second consecutive meeting. Furthermore, investors will be closely watching Fed Chair Jerome Powell’s post policy meeting press conference for any indications of how much higher rates will rise and when officials might consider a pause.