Pound seesaws amid variable economic data, US Dollar restricted by lack of data

GBP/EUR exchange rate: Pound fluctuates amid mixed economic data

The Pound Euro (GBP/EUR) exchange rate traded erratically through the second half of last week’s session, amid mixed economic data.

Sterling initially strengthened against the Euro following hotter-than-expected inflation data. In December, headline inflation accelerated beyond forecasts, leading GBP investors to pare Bank of England (BoE) interest rate cut bets.

However, a shock plunge in retail sales data subsequently triggered a sell-off for the Pound. Sales fell by 3.2% in December, significantly below the expectations of a 0.5% decline and stoking UK recession fears.

Looking to the week ahead, GBP exchange rates may struggle to find direction as UK data is in short supply, ahead of the BoE’s latest interest rate decision.

GBP/USD Exchange Rate: Pound oscillates despite improving economic outlook

The Pound US Dollar (GBP/USD) exchange rate fluctuated at the end of last week’s session, despite a brightening outlook for the UK economy.

Monday saw Sterling strengthen against its peers, shrugging off lingering recession anxieties. While analysts warned the UK likely fell into a technical recession at the end of 2023, the outlook for 2024 looked more upbeat.

After struggling on Tuesday, The Pound is rallying this morning as the UK’s latest PMI figures outpaced expectations. GBP investors were particularly impressed by the services index, which jumped to a new eight-month high.

With UK data thin on the ground over the coming days, GBP/USD is likely to grow more sensitive to market sentiment, potentially leading the pairing to stumble if sentiment sours.

USD/GBP Exchange Rate: US Dollar wavers in spite of strong sales data

The US Dollar Pound (USD/GBP) exchange rate wavered over the last seven days, despite robust economic data.

Wednesday saw the US Dollar hit a five-week high against its peers, following better-than-forecast retail sales data for December.

This was accompanied by a drop in initial jobless claims on Thursday, which yielded additional tailwinds for the US Dollar.

However, shifting risk appetite has resulted in uneven trade in the US Dollar through the first half of this week.

USD investors are also reluctant to make any aggressive bets ahead of the latest US GDP figures. Tomorrow’s figures could act as a headwind for the US Dollar amid forecasts that growth will have slowed sharply in the last quarter of 2023.

Looking ahead, Federal Reserve will deliver its latest interest rate decision next Wednesday. The Fed is expected to leave rates unchanged, but hints of imminent rate cuts may weaken USD.

EUR/USD Exchange Rate: Euro fluctuates rocked by cautious ECB minutes

The Euro US Dollar (EUR/USD) exchange rate fluctuated over the past week. The Euro initially rose, following confirmation of accelerating inflation and a risk-averse market mood.

Concern over the Eurozone’s economic outlook subsequently weighed on EUR, as the latest European Central Bank (ECB) meeting minutes struck a cautious tone.

The Euro then met further pressure as a surprise contraction in German PPI pressured EUR at the end of last week.

Anticipation for the ECBs latest interest rate decision undercut the common currency at the beginning of this week. Speculation continues to mount about when the central bank will begin to cut interest rates, capping EUR.

Tomorrow, the ECB is set to publish its latest interest rate decision. No policy changes are expected from the bank this month. But the Euro could jump if the bank

John Mulcahey

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