Sterling under pressure against the euro and dollar – will the pound weaken further?

Sterling under pressure against the euro and dollar – will the pound weaken further?

Sterling exchange rates have once again come under pressure following comments from Fed chairman Jerome Powell and Bank of England member Catherine Mann regarding future interest rate policy.

GBPEUR is trading within range of the 5-month low, which makes now an opportune time for euro sellers. A transfer of €100,000 is buying £3500 more vs the 5-month high for GBPEUR. Cable (GBPUSD) has also clawed back and is very close to the 2-month low. A transfer of £100,000 is buying $6000 less than the 2-month high.

At Lumon we have access to several tools that can help private clients and businesses navigate the volatile market and protect against currency risk. If you have an upcoming exchange involving the pound or any currency please reach out to me directly on [email protected] to set up a no obligation chat.

Several readings of key US economic data have been stronger than expected in recent weeks, the most notable being Non-farm payrolls which came in higher than 500K vs expectations in the 200K range. The strong data has handed the Fed further ammunition to continue raising interest rates.

Powell believes the Fed need to do more to cool down the US economy and reduce inflation and therefore may need to raise interest rates higher than expected. Non-farm payrolls for February is released tomorrow and expectations are for 203K. A higher than expected reading here will likely boost the dollar and weigh on sterling.

Sterling’s position and future prospects have been weakened by comments from the BoE. Catherine Mann said on Tuesday that we should expect further downward pressure for the pound if the markets had not ‘priced in’ the hawkish tone from the Fed and ECB. The ECB are also expected to continue raising rates in the coming months which has supported the euro against the pound.

The next BoE meeting is March 23rd, the pound may come under more pressure if the Bank confirm the end to their current rate hike cycle.