This is one of the most significant weeks for exchange rates so far this year. The European Central Bank is widely expected to raise interest rates on Thursday, and US inflation figures land on Wednesday — a result that could shift expectations for the next Federal Reserve decision on 17 June. Meanwhile, the Middle East situation has deteriorated sharply over the weekend, with Israel and Iran exchanging missile fire for the first time since the ceasefire was agreed in April. The ceasefire is now hanging by a thread, and oil prices are responding.
Looking slightly further ahead, 18 June is shaping up to be a date worth circling. The Bank of England’s next interest rate decision lands on the same day as the Makerfield by-election, a combination that could stir real uncertainty for the pound. For anyone with a currency transfer on the horizon, the next few weeks could bring meaningful movement.
Latest market insights:
Pound to euro:
Relatively steady, but potential for movement this week
- The pound has held firm against the euro in recent weeks, helped by the fact that UK interest rates are currently well above those in Europe. Markets have put the probability of an ECB rate hike at over 90% on Thursday. If that happens, the euro could strengthen against the pound in the days that follow.
- For property buyers, a 1% move on a €400,000 purchase equals €4,000 — money that comes straight off your budget. Locking in a rate in advance with a forward contract means you know exactly what you’ll pay, whatever happens on Thursday.
US dollar to euro:
The dollar has eased slightly against the euro over the past week
- The dollar had softened as hopes of a Middle East peace deal reduced the appeal of holding US currency as a safe haven. However, the weekend’s renewed fighting could reverse that quickly — a breakdown in the ceasefire tends to send investors back towards the dollar for safety, which could put pressure on this rate in the coming days. Wednesday’s US inflation figures will also be closely watched; if prices are rising faster than expected, it could strengthen the dollar further ahead of the Fed decision on 17 June.
Pound to US dollar:
Broadly stable, but the pound is finding it hard to push higher
- Two key central bank decisions are on the horizon — the US Federal Reserve on 17 June and the Bank of England on 18 June — and markets are beginning to price in the possibility of rate rises on both sides of the Atlantic later this summer, which could bring notable moves for sterling. Wednesday’s US inflation data is an important stepping stone, giving markets their clearest signal yet of what the Fed might do the following week.
If you have upcoming currency requirements or would like to discuss how these events could affect your plans, we’re here to help, contact Lumon on +44 (0)204 506 5672 for a free, no-obligation conversation and discover what options you have available to help.
