By James Tucker
This week, the US dollar has remained in the driving seat, although trading has been fairly cautious as investors wait for fresh signals from the US Federal Reserve. The dollar has held onto most of the gains it made over the past week, leaving both the pound and the euro struggling to build momentum.
GBP/USD
Sterling has spent much of the week on the back foot against the US dollar. There has been little in the way of positive UK news to encourage buyers, while confidence in the US economy has continued to underpin the dollar. As a result, the pair has drifted lower rather than suffering a sharp sell-off. Unless UK data provides a positive surprise later this week, the outlook still favours a slightly softer pound against the dollar.
EUR/USD
The euro has also found it difficult to make progress against the dollar. The single currency has been trading in a relatively narrow range, with investors preferring to hold dollars until there is more clarity on the outlook for US monetary policy. Overall, the move has been more about broad-based dollar strength than any significant weakness in the euro itself.
GBP/EUR
The pound has eased back against the euro after enjoying a strong run earlier in the month. Sterling has simply lost some of its recent momentum, while the euro has been comparatively resilient. This has allowed the euro to recover some ground, leaving the pound under modest pressure. At the moment, the balance of risks suggests there is still room for GBP/EUR to edge a little lower if UK economic data fails to impress.
Overall view
The main theme this week has been patience rather than volatility. Currency markets are waiting for fresh economic data and central bank guidance before making larger moves. For now, the US dollar remains the strongest of the three major currencies, the euro has been relatively steady, and the pound has softened after its gains earlier in July.
From a sterling perspective, the picture has become a little less encouraging than it was a couple of weeks ago. While there is no sign of a major decline, the pound has lost some of its momentum against both the dollar and the euro. Unless upcoming UK economic releases exceed expectations, sterling may continue to drift lower, particularly against the euro where the recent upward trend has started to fade. As always stay in close contact with your currency consultant to help you move your money.