By James Caley
This week has been relatively uneventful for the GBP/EUR exchange rate. The strength of the pound has not been significantly impacted by major data releases or speeches from the European Central Bank’s Governing Council or the Bank of England’s Monetary Policy Committee. As of yesterday’s close, GBP/EUR continues to trade comfortably within the 0.3-cent range it has occupied for the past five days.
With the upcoming UK Budget next week and potential interest rate cuts expected in the following week, are we experiencing a calm before the storm? Or could other key data releases later this week disrupt the markets?
Today, there are no significant data releases, so we appear to be on steady ground for now. However, several speeches are scheduled from both the Bank of England and the ECB, the tone of which could drive significant market movements. As we’ve seen recently, even a remark from Bank of England Governor Andrew Bailey—suggesting the BoE may adopt a more aggressive approach to interest rate cuts—immediately led to a weakening of the pound.
Statements and interviews from central bank governors and presidents can have a profound impact on market sentiment, so it’s prudent to stay alert for any updates.
Sterling has not fared as well against the US dollar this week, with a clear downward trend since markets opened on Monday. This decline doesn’t appear to be linked to any particular data release, but rather reflects a broader market sentiment, as investors gravitate towards the relative safety of the dollar amid ongoing conflict in the Middle East.
The pound has also weakened against the Canadian dollar, Australian dollar, and UAE dirham, possibly indicating a general softness in the currency, despite the International Monetary Fund’s upgraded growth projections for the UK economy in 2024, offering a more positive outlook for the nation’s economny.
As the week progresses, economic data remains sparse, leaving market movements largely dependent on speeches and broader political or economic developments.
While sterling has shown some weakness early in the week, it continues to trade at relatively high levels against both the euro and the dollar. If you have a requirement for one of these currencies and are concerned about the potential market shifts in the next two weeks—due to the UK budget and anticipated interest rate cuts—please contact your currency consultant for expert guidance or to take advantage of the current highs.