By Matt Boyle
GBP/EUR
At the start of the week the Pound strengthened against the Euro, largely due to heightened global risk sentiment, as military conflict continues to play out around the globe. This was however short-lived due to a combination of UK economic weakness, looming tax hikes and BoE interest rate cuts, contrasted with Euro steadiness, as the ECB held interest rates at 2%. The result was that the half a cent gain the Pound made at the beginning of the week was quickly lost.
The ECB are now expected to cut interest rates in December, whilst some expect the BoE to cut rates when they meet on the 7th August. If not then, it looks almost certain for September.
GBP/EUR is undoubtedly feeling pressure and could push lower due to BoE’s more dovish stance versus the ECB’s stance. The Pound’s woes continued this morning with both the year-on-year and month-on-month UK retail sales figures coming in under expectation.
Consequently this morning we have seen GBP>EUR buying rates drop once again by just over half a cent.
GBP/USD
Sterling rallied earlier this week against the US Dollar, spurred by optimism around US / Japan trade developments. Despite yesterday’s announcement of a UK trade deal with India, as with the single currency, this was short-lived for the Pound versus the Greenback.
PMI data showed weak UK business activity and job cuts, pushing GBP buying rates down amid rising market bets on an 80% chance of a BoE rate cut in August. Again, markets will look toward the BoE rate decision 7th August and the accompanying speeches for clues to fiscal policy moving forward, along with US inflation data for anticipated GBP/USD direction moving forward in the short term. A rise in US inflation favours the dollar and would see buying rates fall.
With the Dollar in a slightly weaker position vs the Pound currently, GBP>USD rates dropped by around a third of a cent following the poor UK retail sales data this morning.
EUR/USD
The ECB interest rate cutting policy pause and resilience in the Eurozone economy, countered USD strength this week, seeing the single currency gain around a cent against the USD, taking buying rates to multi-month highs.
Technical signals show a modest upside bias, which could see rates breakout higher should the Dollar weaken further. With little data of note left this week, eyes will look towards US durable goods orders, non-farm payrolls next week and upcoming CPI inflation data for the Dollar.
With the Pound on the back foot particularly against the Euro and with BoE meetings and the Autumn budget on the horizon, readers with an upcoming requirement would be wise to get in touch sooner rather than later.
There are several ways in which we can help you mitigate the risk of the cost of your upcoming currency requirement increasing, including forward contracts and stop-loss orders.
Speak to your currency consultant today for some friendly and professional guidance on how we can help your money go further.