By James Caley
Sterling has continued its recovery against the Euro, building from the low point sparked by the so-called “Trump effect” on April 11th. By yesterday’s close, GBP had risen nearly three cents from its recent 18-month low. The question now is whether this recovery can be sustained, or if Sterling is at risk of stalling once again.
With limited UK economic data scheduled for release this week, the Pound’s direction is likely to be influenced by external events, particularly from the Eurozone and the US.
Today, markets will be watching closely for Eurozone GDP figures. A stronger-than-expected result could bolster the Euro and put downward pressure on Sterling. Conversely, if growth data disappoints, the Pound could benefit and extend its recent gains.
Looking ahead to Friday, the Eurozone’s Consumer Price Index (CPI) will also be in focus. Above-average inflation readings are typically viewed as bullish for the Euro, and any upside surprise could weigh further on GBP/EUR.
In contrast, GBP/USD has been trading at multi-year highs this week. Great news for clients purchasing US dollars, though less favourable for those repatriating funds to the UK.
Tomorrow, the US releases two key economic indicators: Q1 GDP and Core Personal Consumption Expenditures (PCE). The latter, a critical inflation gauge for Federal Reserve policymakers, has the potential to shift expectations around interest rate policy. Strong data could lead to a more hawkish Fed stance on interest rates.
Also on the radar is Friday’s US Nonfarm Payrolls report. While forecasts suggest a significant drop in job creation, a weaker-than-expected figure could see the dollar come under pressure, pushing GBP/USD even higher—potentially to levels not seen since 2022.
Next week brings the Bank of England’s interest rate decision. Markets have largely priced in a 0.25% cut, so unless the BoE surprises with a larger move or holds rates steady, the announcement itself may not cause significant volatility. However, as always, the tone of accompanying commentary and speeches will be closely scrutinised.
If policymakers hint at a deeper or more prolonged cutting cycle, something increasingly likely if inflation remains contained, this could dampen investor sentiment and weaken the Pound further.
With multiple key data releases and central bank events on the horizon, market volatility is almost certain. To stay ahead of the curve and manage your currency exposure effectively, speak to one of our consultants for expert, friendly guidance tailored to your needs.