Will the pound weaken again?

Pound to Euro Starts the Week off Steady

Sterling exchange rates hang in the balance once again following a day of poor performance in yesterdays session. The pound dropped close to monthly lows against euro while also losing value against the US dollar and a basket of other currencies. Sterling has opened this morning on a more positive footing.

The announcement that cryptocurrency giant Binance would not rescue their competitor FTX triggered a significant sell-off in the crypto markets. A number of asset funds are invested in the crypto sphere meaning a sell-off here led to a shift in global risk appetite.

Over recent months the pound has been gaining and losing ground as risk sentiment has shifted. A positive risk appetite has benefited the pounds value and any negative moods have generally led to the pound weakening. The dollar is the global ‘safe haven’ currency so unsurprisingly negative shifts in risk appetite lend support to the value of the greenback.
Key inflation and jobs data is due from the US this afternoon.

Inflation is forecast to show a yearly reading of 8% slightly lower than the last figure of 8.2%.

A lighter or heavier than expected inflation reading could affect the Federal Reserve’s interest rate policy moving forward. If the figure is light, the Fed may hike interest rates by less than previously expected. If the figure is heavy, the Fed will likely continue with their current rate hike cycle. The dollar has benefited from interest rate hikes, therefore, a light inflation figure could lead to dollar weakness.

Bank of England member Silvana Tenreyro is speaking in the afternoon and markets will be digesting any commentary around future monetary policy and the UK’s economic outlook.

Last week, the Bank stated that the UK would be heading for the worst recession seen in 100 years. Tomorrow growth figures are expected to show a contraction in the UK economy during the last quarter which supports the Bank Of England’s prediction of a recession. A reading of negative growth presents significant risk to the pounds value.

If you have a currency exchange involving the pound and any major currency and wish to discuss the markets and how they may impact the cost of your exchange in the near future, feel free to email me [email protected].