France
18 November 2024
Weekly Market Headlines:
- Pound to euro rates fall from last week’s 2½ year high. Friday’s report showing UK economic growth of just 0.1% between July and September contributed to a slight 1-cent drop in the pound to euro rate compared to last week.
- The latest Eurozone and UK inflation figures, due on Tuesday and Wednesday, respectively, which may cause further movements for the pound.
- US dollar remains strong. Over the past eight weeks, the US dollar has risen 6.2% against both the pound and the euro. Today, $100,000 buys an extra £4,700 and €5,500 compared to eight weeks ago.
After a busy few weeks of political and economic developments, the data flow continues this week. The key event will be the release of UK inflation figures on Wednesday, with economists polled by Reuters forecasting a rise to 2.2%. This would exceed the Bank of England’s target of 2% and increase from the 1.7% recorded in September.
Inflation figures often impact the pound, as they are a crucial indicator for the Bank of England when considering interest rate adjustments. Following Friday’s disappointing GDP report, which showed just 0.1% growth for July to September and negative growth in September, markets are eager to assess whether predictions that the Bank of England will hold off on rate cuts until the new year are accurate.
A lower interest rate generally weakens the currency, so the pound may react to any unexpected changes in Wednesday’s inflation data. Additionally, UK retail sales figures and the latest PMI (Purchasing Managers’ Index) data are due on Friday, making it a busy week that could present opportunities for those looking to buy or sell sterling.
Globally, attention will also be on Eurozone inflation and PMI figures for both the US and Eurozone, as these could influence expectations of further rate cuts in these economies.
On the political front, the strong “Trump trade” continues to boost the US dollar against the pound and euro. Markets are watching to see if this momentum will persist. With the US dollar accounting for around 60% of global FX trading, fluctuations in its value could lead to movements in other currencies, as seen in recent weeks.
The US dollar’s strength is further supported by geopolitical tensions, as Russia intensifies attacks in Ukraine and President Biden authorises Ukraine to use long-range missiles. As a safe-haven currency, the US dollar often strengthens during times of increased geopolitical uncertainty. The West’s response to Russia remains uncertain, with significant implications for FX markets.
Contact your account manager on +44 (0) 204 506 5672 to explore your options.
What events might move exchange rates this week?
GBP
- Wednesday: UK inflation
- Friday: Retail sales & Services data
EUR
- Tuesday: Eurozone inflation
- Friday: Eurozone services
USD
- Thursday: Inflation
