US dollar strengthens further, boosting pound-to-euro rates

11 November 2024

Weekly Market Headlines:

Best time in 31 months to buy euros with pounds: The stronger US dollar continues to pull down the euro, pushing pound-to-euro levels to new highs.
Best time in five months to buy euros with US dollars: The appreciating US dollar is impacting the euro, with current rates only slightly below the best levels in 2024 to sell US dollars for euros.
Markets debate what a Trump presidency means: Financial markets are still evaluating the implications of the new US government on stocks, currencies, and other assets, causing ongoing volatility.

The ‘Trump trade’ from last week continues, with the US dollar reaching new highs against the euro—the strongest level for the greenback against the single currency since June. This movement in EUR to USD exchange rates has weakened the euro against the pound, boosting GBP to EUR levels.

The pound-to-euro rate is now testing highs not seen since April 2022. When a similar level was reached in October, it was short-lived before the market pulled back, highlighting how quickly the FX market can change.
This week brings a focus on economic data, with UK Unemployment and UK GDP reports due. Last week, the Bank of England cut interest rates to 4.75% as expected. While no further cuts are anticipated for 2024, additional cuts are projected for 2025. Any signs of slowing data could prompt renewed calls for cuts, which in principle could weaken the pound.

Sterling is benefiting from higher interest rates compared to the Eurozone’s 3.25%. The US currently sits at 4.5%-4.75% after their rate cut last week, leaving sterling in a strong position against both currencies from an interest rate perspective. Both the US and Eurozone are expected to cut rates at their upcoming meetings, which could influence these currencies against the pound for the rest of 2024.

The Eurozone’s latest GDP data and the US inflation figures will be crucial in shaping future interest rate policy.
The market remains focused on what a Trump presidency means for the US and the global economy. Initial concerns over potential trade tariffs are still being digested. While fear and uncertainty linger, markets will require clearer guidance on the real-world implications of these changes.

The uncertainty and shifts in sentiment could continue to drive currency market movements. That’s why it’s essential to stay in touch with your dedicated Lumon contact for updates as the situation unfolds. Contact your account manager on +44 (0) 204 506 5672.

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