By James Caley
Following a steady downward trend since the start of January, this week has been relatively uneventful for GBP/EUR, trading within a narrow half-cent range between Monday and Thursday.
A series of significant data releases, including German PPI figures, UK unemployment data, a speech by ECB President Lagarde, and Eurozone consumer confidence, had the potential to shift the market considerably. When we see economic data deviate significantly from forecasts, it often prompts market reactions, with traders buying or selling the relevant currency, resulting in notable movements.
However, despite some surprises in the data, either exceeding or falling short of expectations, there has been minimal reaction this week, which is somewhat unusual. This lack of volatility might be attributed to global attention being diverted to the United States, particularly following Donald Trump’s inauguration.
On Monday, the currency market reacted sharply, with the dollar weakening against the pound, losing nearly 2 cents by the close of trading. While the dollar saw a modest recovery on Tuesday, it continued to slide midweek, ending Thursday approximately 3 cents lower against the pound compared to the start of the week. This decline was exacerbated by Trump’s comments, which called for the Fed to lower interest rates and urged other nations to follow suit.
EUR/USD mirrored the GBP/USD movement throughout the week, with the dollar weakening against the euro.
The week isn’t over yet, and today presents several medium to high impact economic releases that could influence sterling’s performance against both the euro and the dollar.
Germany’s services and manufacturing PMI data will be released early in the day. While the manufacturing sector is expected to underperform, the services sector is forecast to deliver stronger results, likely balancing out overall. Similarly, UK S&P PMI data and US PMI data are due, with the UK expected to mirror Europe’s mixed results. In contrast, stronger PMI figures are anticipated for the US, which could bolster the dollar against both the euro and sterling.
Additionally, two ECB speeches are scheduled, with policymakers already hinting at multiple interest rate cuts in 2025. Any unexpected announcements during these addresses could impact euro strength. Later in the day, the US will release existing home sales data and the Michigan Consumer Sentiment Index, both of which could further sway the market.
With a busy day ahead, we may see increased market volatility. To safeguard against adverse movements, don’t hesitate to contact your currency consultant for expert guidance and support.