Pound Cushioned by Elevated BoE Hike Bets, US Dollar Rises amid Increased Global Growth Fears

GBP/EUR Exchange Rate: Pound Choppy amid Elevated BoE Hike Bets

The Pound Euro (GBP/EUR) exchange rate saw volatile trade over the past week, though it managed to hold strong as Bank of England (BoE) rate hike bets underpinned GBP.

Although the latest sales data from the Confederation of British Industry (CBI) dented Sterling, perceptions of a growing divergence amongst central banks provided the currency with support.

The BoE is expected to keep hiking beyond the European Central Bank (ECB), lending strength to Sterling. The ECB’s recent hike was perceived as dovish, lending extra credence to the view.

Attention now turns to the Bank of England’s interest rate decision on Thursday. If policymakers strike a more hawkish tone than the ECB did last week, the GBP/EUR exchange rate could surge higher.

GBP/USD Exchange Rate: Pound Crumbles as Economic Worries Increase

The Pound US Dollar (GBP/USD) exchange rate fell sharply over the past week, as economic anxieties intensified.

Due to elevated interest rates and significantly high inflation, the UK economy has seemingly begun to buckle under the pressure. The final manufacturing index confirmed a contraction, with the survey indicating further signs of economic weakness.

Elsewhere, a souring market mood brought the Pound additional headwinds, due to its increasingly risk-sensitive nature.

Later this week, volatility could strike the pairing as the Bank of England unveils its latest interest rate decision. Could hawkish forward guidance boost GBP/USD?

USD/GBP Exchange Rate: US Dollar Rises on Reignited Fed Hike Bets

The US Dollar Pound (USD/GBP) exchange rate strengthened over the past seven days, recovering from initial losses following the Federal Reserve decision, as markets bet on another hike from the US central bank.

US GDP for the second quarter printed far above forecasts, showing an unexpected acceleration in growth. This reignited bets on additional tightening from the Fed, bringing further strength to USD. However, these gains were capped by a cooldown in the Fed’s preferred inflation gauge.

The ‘Greenback’ was able to end the week firmly, as global recession anxieties began to increase, bringing safe-haven flows.

On Friday, the US Dollar could post losses if July’s non-farm payrolls data decreases in line with forecasts. Perceptions of a loosening labour market may pour cold water on Fed tightening expectations, therefore denting USD.

EUR/USD Exchange Rate: Euro Drops as ECB Delivers Dovish Hike

The Euro US Dollar (EUR/USD) exchange rate sank over the past week, as a dovish hike from the European Central Bank weighed on EUR.

While the ECB delivered the anticipated 25bps rate increase, policymakers appeared coy on the prospect of future tightening. Inflation is seen to have turned a corner in the Eurozone, while the economic outlook is growing more downbeat.

This was compounded by the latest inflation data, which showed that inflation had once again cooled in the bloc. Despite upbeat GDP data for Q2, investors were unconvinced the ECB would raise rates further.

These pared-back bets prompted investors to shrug off a fall in German unemployment, leaving EUR low against its peers.

Looking ahead, German data is likely to remain the focus over the week’s session. While the bloc’s largest economy is forecast to see an expanded trade surplus, any gains could be erased by downbeat factory orders.

John Mulcahey

Contact John Mulcahey

Do Not Sell My Personal Information