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Sterling climbed to its highest in several weeks against the euro on Wednesday.
Sterling advanced to its strongest level against the euro since early January on Wednesday, as the European Central Bank’s (ECB) next interest rate decision and key economic data dominated proceedings.
The US dollar would enjoy the lion’s share of the gains, however. GBP/USD lost around half a cent and EUR/USD roughly the same. After the tech selloff and ahead of the Federal Reserve’s rate decision, the majority of the activity was marked by safe-haven flows.
Over in the US, the Fed kept interest rates on hold at a low-key meeting that offered limited insight into its future policy. Despite trying to fly under the radar, chair Jerome Powell is expected to collide with the political might of Donald Trump in the near future. In fact, Trump has already recorded his anger with last night’s decision, accusing the committee of failing “to stop the problem they created with inflation.”
The French economy unexpectedly shrank by 0.1% in the fourth quarter of 2024. If that initial estimate were confirmed, it would be the first time GDP in the country has fallen on a quarterly basis since the start of 2022. The data reflects a number of factors, including political turmoil and fading revenue after the summer Olympics.
Busy times for the euro present further risks to its standing. Ahead of a further barrage of GDP reads from Germany, Italy and the eurozone at large, the euro faces a high-stakes period that is likely to see increased volatility. Whether the euro goes up, down or sideways in the coming days is anyone’s guess.
It wasn’t just the ECB and Fed in focus. Central banks around the world were active yesterday, with quarter-point cuts for Sweden’s Riksbank and the Bank of Canada. Brazil’s policymakers meanwhile raised interest rates by a full percentage point to above 13%.
UK chancellor Rachel Reeves yesterday unveiled plans to build a third runway at Heathrow airport. Long debated, the third runway is part of the Labour government’s much vaunted efforts to put economic growth at the heart of every decision.
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GBP: Familiar forces for sterling
The pound’s formerly familiar pattern (strong against the euro, weak against the US dollar) resumed yesterday. While it has ample opportunity to rise or fall against the euro, sterling faces an uphill battle against the US dollar, where powerful forces continue to thwart European currencies.
GBP/USD: the past year
EUR: GDP onslaught
A busy streak of European GDP releases is under way. While much of the focus is on the ECB, markets will be keeping tabs on eurozone and nation data, which is likely to feed through to the euro. Spain kicked things off yesterday with stronger than expected growth in the final quarter of 2024, as one of Europe’s bright spots continued to post impressive figures.
GBP/EUR: the past year
USD: Watching growth and jobs
The same safe-haven forces that have marked 2025 swirled yesterday to boost the US dollar. A comparatively uneventful Fed event means that focus now turns to this afternoon’s GDP and initial jobless claims, which should combine to offer the dollar some direction.
EUR/USD: the past year
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