By Simon Eastman
Last week we saw Sterling trade at some of the best levels in months against the single currency, whilst against the US dollar, we have only seen the rates this low briefly since May 2025.
The cause is risk aversion due to the Iranian conflict, with investors looking to safeguard their funds in the safe haven safety of the Greenback, whilst inflationary pressures have led Pound traders to pull back on interest rate cut expectations and therefore Sterling has been benefiting. As regular readers will know, interest rates being cut is a negative for the currency as it’s less attractive for investors to put their money into. The Pound has benefitted from this more than the Euro as the European Central Bank had already stopped their rate cutting cycle, whereas the Bank of England was fully expected to cut a few more times this year, possibly as soon as their next meeting, this week. We have seen the Dollar also increase against the Euro, with rates currently at the best they’ve been since June 2025.
With reports last night that the Israel Defence Forces had launched “extensive strikes” across western Iran, this week is likely to remain US dollar positive, With market volatility vulnerable to the evolving conflict in the Middle East. For those with Sterling in hand, we saw GBPEUR hit a key resistance ceiling a few times over the last week, failing to break through each time. As such, those Euro buyers out there should be aware the current rates might be the peak you have been looking for, and therefore it could well be a good time to consider securing your funds for those upcoming completions now. Especially with the Bank of England meeting on Thursday, in case the meeting throws up any curve balls regarding interest rate cuts.
The week ahead has a few key releases including a raft of central bank interest rate decisions, which may also influence the exchange rates, so worth noting the following.
Monday – Canadian inflation and US industrial production.
Tuesday – Australian interest rate decision, EU and German ZEW economic sentiment survey results.
Wednesday – EU core inflation, US inflation, Canadian interest rate decision and policy statement, US factory orders, Canadian press conference, US interest rate decision, policy statement, interest rate projections and press conference. New Zealand GDP
Thursday – UK unemployment and average earnings data, Swiss interest rate decision and press conference, UK interest rate decision, policy statement, EU interest rate decision, policy statement and press conference.
Friday – German inflation, Canadian retail sales, and the Fed monetary policy report.
A week driven by central banks and interest rates, as well as the ongoing conflict in the Middle East, so plenty for markets to be influenced by. Stay in touch with your currency consultant here to help make your money go further.