GBP/EUR Exchange Rate: Pound Seesaws as BoE Leaves Rates Unchanged
The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week, following the Bank of England’s (BoE) interest rate decision.
Initially, the Pound remained largely rangebound as investors braced for the decision, and were hesitant to make moves.
While the BoE kept interest rates unchanged, as expected, this injected some volatility into GBP. The bank’s accompanying forward guidance provided a bleak outlook for the UK economy, which concerned investors.
Sterling then skyrocketed on Friday, as a bullish trade impulse swept across markets. This allowed GBP to climb against most major peers, despite a lack of data.
On Friday, the UK’s third quarter GDP data is due to print, with economists anticipating a 0.1% contraction over the last quarter. If this proves accurate, Sterling could slide amid reignited recession anxieties.
GBP/USD Exchange Rate: Pound Edges Lower as Market Mood Sours
The Pound US Dollar (GBP/USD) exchange rate ticked downward at the beginning of this week, due to a continued lack of data.
Monday saw GBP exchange rates continue their recent run of strength, amid a bullish market mood. However, towards the end of the session, Sterling began to fall as investors cashed in.
Dovish commentary from BoE Chief Economist Huw Pill restricted Sterling on Tuesday. Pill suggested that rate cuts could begin as early as Summer 2024, prompting a reduction of rate hike bets.
Data was in short supply on Wednesday, which left Sterling vulnerable to the cautious market mood, prompting weakness against USD.
Next week, the UK’s latest labour data is due for release. In September, unemployment is anticipated to have ticked up, while wage growth is expected to remain static. This could induce volatility in GBP exchange rates.
USD/GBP Exchange Rate: US Dollar Rocked by Fading Fed Rate Hike Bets
The US Dollar Pound (USD/GBP) exchange rate endured volatile trade over the last seven days, following inaction from the Federal Reserve.
Wednesday saw the US Dollar begin in a mixed capacity, the Fed’s interest rate decision prompted USD to slump. While Fed Chair Jerome Powell left the door open for further tightening, it did little to assuage investors.
Perceptions of a dovish tilt from the Fed brightened the market mood, as investors considered an end to the current hiking cycle. This saw USD drop tick down on Thursday, as markets moved towards riskier investment opportunities.
The ‘Greenback’ then cratered on Friday, as October’s non-farm payroll data came in significantly below forecasts. Amid concerns of a cooling US labour market, investors sold off USD in droves.
This downward momentum continued to affect USD exchange rates on Monday. However, markets began to reposition towards the end of the session, with USD seemingly oversold.
Risk averse trade allowed the ‘Greenback’ to regain further ground as investors supported the safe-haven currency.
This afternoon and tomorrow, Fed Chair Jerome Powell is scheduled to speak. If he takes a hawkish stance, the ‘Greenback’ could strengthen amid renewed rate hike bets.
EUR/USD Exchange Rate: Euro Marches Higher as USD Slides
Trade in the Euro US Dollar (EUR/USD) exchange rate was volatile over the last seven days, amid notable weakness in the US Dollar.
Last Wednesday, the Eurozone’s third quarter GDP data printed at -0.1%, alongside a sharp cooldown in October’s inflation levels. This prompted markets to pare back existing European Central Bank (ECB) rate hike bets, weakening EUR.
However, as the US Dollar began to retreat through Thursday and Friday, EUR gained ground due to their negative correlation.
The Euro maintained a positive trajectory at the start of this week as German factory orders for September printed above expectations on Monday.
However, this was offset by dismal German industrial production data on Tuesday. The unexpected contraction of 1.4% placed pressure on EUR, but the downbeat market mood limited these losses.
On Wednesday, the Eurozone’s September retail sales data printed below forecasts, bringing choppy trade to EUR.
On Friday, ECB President Christine Lagarde is scheduled to speak. If she maintains the ECB’s recent cautious stance, EUR could weaken.