Pound Swings on Sticky Core Inflation, US Dollar Supported by Fed Hike Bets

GBP/EUR Exchange Rate: Pound Strikes One-Month High amid Sticky Core Inflation

Trade in the Pound Euro (GBP/EUR) exchange rate wavered higher over the past week, as Bank of England (BoE) rate hike bets returned.

On the back of surprisingly resilient core inflation, Sterling strengthened as investors bet on more policy tightening from the British central bank.

However, GBP’s gains were clipped on Friday following the publication of the latest UK retail sales data. Over July, sales slumped significantly by 1.2% due to dismal weather.

GBP investors will now keep an eye on the Confederation of British Industry’s (CBI) distributive trades data. With a further fall in sales forecast by economists, this could weigh heavily on Sterling.

GBP/USD Exchange Rate: Pound Seesaws amid Limited Data

The Pound US Dollar (GBP/USD) exchange rate seesawed over the last week, as an intermittent data calendar kept GBP in flux.

Following volatility injected by the previous week’s inflation data, Sterling has been unable to fully consolidate its gains. Owing to a light data calendar, GBP has been left vulnerable to shifts in the market mood.

Due to GBP’s increasingly risk-sensitive nature, Tuesday’s upbeat market mood brought support to the currency. This morning, Sterling is crumbling against its peers following a shock contraction in the UK private sector in August.

Into next week, data releases for the Pound are in short supply. Because of this, risk appetite is likely to be the core catalyst of movement. Could bullish trade strengthen Sterling?

USD/GBP Exchange Rate: US Dollar Rises amid Renewed Fed Rate Hike Bets

The US Dollar Pound (USD/GBP) exchange rate rose over the last seven days, despite enduring volatile trade.

Initially, hawkish Federal Reserve minutes boosted USD by indicating room for a further rate hike. However, this was undermined by a return to risk-on trade which weighed on the safe-haven currency.

Thus far this week, the ‘Greenback’ has managed to climb higher on the back of rising US Treasury yields. This has allowed USD to negate the upbeat market mood and firm against the Pound.

On Friday, Fed Chair Jerome Powell is scheduled to deliver a speech at the Jackson Hole Symposium. If he takes a hawkish stance, the ‘Greenback’ may rally amid renewed rate hike bets.

EUR/USD Exchange Rate: Euro Undermined by Growing Economic Concerns

The Euro US Dollar (EUR/USD) exchange rate traded in a wide range over the past week, as investors examined the Eurozone’s economic outlook.

Despite upbeat industrial production data, the common currency was unable to gain ground in the middle of last week. Beyond this, a lack of impactful data releases prevented EUR from garnering much support.

However, EUR managed to tick higher on Monday without a clear catalyst. These gains were swiftly erased on Tuesday due to German economic anxieties. This morning, a dismal showing from the Eurozone private sector prompted sharp losses for the Euro.

Looking ahead, European Central Bank (ECB) President Christine Lagarde is due to deliver a speech at the symposium. If she offers a dovish outlook for the ECB’s monetary policy, the common currency could fall further.

John Mulcahey

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