US Dollar Tumbles on Rate Cut Speculation, Pound Jumps on Upbeat PMIs

GBP/EUR Exchange Rate: Pound Supported by Upbeat Data

The Pound Euro exchange rate appreciated by roughly a cent over the past week. The upside in Sterling was supported through the second half of last week by the publication of the UK’s latest PMIs.

November’s preliminary figures reported the UK’s private sector unexpectedly returned to growth. This helped to quell UK recession fears and helped the Pound to close last week’s session on a high.

While UK data has been in short supply so far this week, the GBP/EUR exchange rate has been able to maintain a positive trajectory amid the improving outlook for the UK economy.

Going forward, UK data remains thin on the ground over the next seven days. As a result, movement in the increasingly risk-sensitive Pound may be tied to market sentiment. If the mood remains broadly upbeat, then GBP/EUR may remain supported.

GBP/USD Exchange Rate: Sterling Supported by Hawkish BoE

The Pound US Dollar exchange rate was catapulted to a new three-month high over the past week. While this was driven in large part by a USD selling bias, the upside in the pairing was also supported by a hawkish Bank of England (BoE).

Remarks from BoE policymakers struck a notably hawkish tone over the past week. One of these was BoE Chief Economist Huw Pill, who on Friday suggested the bank isn’t ready to ‘declare victory’ over inflation.

Alongside a speech from BoE Governor Andrew Bailey, in which he said the bank is ‘not in a place where we can discuss cutting interest rates’, this has seen GBP investors rush to reprice expectations for when the BoE might start loosening its monetary policy.

Looking ahead, the Pound looks poised to extend these gains, at least in the short-term, as the BoE’s hawkish tilt sets it apart from most of the other major central banks.

USD/GBP Exchange Rate: US Dollar Nosedives amid Fed Rate Cut Speculation

The US Dollar Pound exchange rate fell sharply over the past seven days as USD demand has been severely undermined by Federal Reserve rate cut speculation.

Following on from some disappointing employment and inflation data earlier in the month, USD investors have turned from betting on one more rate hike from the Fed to speculating on when it will start its cutting cycle.

Also applying pressure to the safe-haven US Dollar has been the general sense of optimism that has prevailed over the past week, with investors hopeful that the global economy will narrowly avoid a recession.

In the spotlight later this week will be the publication of the latest core PCE price index. As the Fed’s preferred indicator for inflation, the US Dollar may relinquish some ground if October’s index reports another deceleration in price growth as this is likely to cement Fed rate cut expectations.

EUR/USD Exchange Rate: Euro Capped by Dovish ECB

The Euro US Dollar exchange rate rallied by a cent over the past week, with the upside in the pairing being driven primarily by the weakness of the ‘Greenback’.

Elsewhere the single currency has struggled to hold its ground, with EUR investors being largely disappointed by recent Eurozone data releases.

However, the main factor keeping a lid on the Euro appears to be some dovish signals from the European Central Bank (ECB).

Over the past week ECB officials have repeatedly warned of risks to the Eurozone economy, giving rise to rate cut speculation in the process.

Looking ahead the Eurozone’s latest consumer price index could pile more pressure on the Euro in the second half of this week as November’s preliminary figures are expected to report inflation edges ever closer to the ECB’s 2% target.

Matthew Andrews

Contact Matthew Andrews

Do Not Sell My Personal Information