Pound Sterling has been range-bound against many of its major counterparts over the last two weeks. Most notably, GBPEUR which has traded within a cent from the high to low. Cable (GBPUSD) has traded within a 2-cent range and struggled to find support above the 1.25 handle.
The pound has strengthened in value due to the revised UK economic forecasts, however, it would seem the positivity has ended here for the pound and that new data will be needed to push the pound out of its current range.
This morning UK GDP figures confirmed that the economy was stagnant and did not grow month-month to February. The data confirms that the UK economy is not shrinking and therefore rights off the possibility of a technical recession but also shows a slow down in activity from last month where the economy grew by 0.4%. GDP could hinder the value of the pound given that markets were expecting a growth reading of 0.1%.
Weakly jobs data and monthly inflation (PPI) data will be released later today in the US which will be watched closely by the Federal Reserve. Yesterday, CPI showed another slowdown of inflation in the US which feeds into the narrative that the Fed’s current rate hike cycle could be over. This has lent support to the value of the euro and pound against the dollar. There could be further dollar weakness if another inflation reduction is confirmed.
Bank of England Chief economist Huw Pill will be speaking today, and markets will keep a close eye out for any comments on future monetary policy. The European Central Bank are behind the BoE in terms of interest rates. If the BoE stop raising rates and the ECB continue, then there could be downward pressure on the pound.
If you have a currency exchange involving the pound and any major currency and wish to discuss the markets and how fluctuations could impact the cost, please contact me at [email protected].
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.