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The pound came under pressure on Wednesday after a sizeable fall to inflation.
The pound wrestled with Wednesday’s news that inflation had fallen to 1.7% in September, ceding ground to its major rivals as markets boosted bets on interest rate cuts.
Yesterday’s session would prove punishing for the pound, which lost around half a cent to the euro and the US dollar. EUR/USD shed about 0.25% ahead of the European Central Bank’s (ECB) interest rate decision this afternoon. The ECB is widely expected to cut interest rates for the third time this year (more on that below).
Last week, French central bank governor and ECB rate-setter Francois Villeroy de Galhau said ” Victory against inflation is in sight…. a cut is very likely,” he said of today’s meeting, adding that “it will not be the last.”
House prices in the UK rose for the sixth consecutive month in August. According to the Office for National Statistics (ONS), the average cost of a home is now £293,000. However, that figure will move significantly higher if you are a London resident.
In an interesting observation yesterday, presidential hopeful Donald Trump said that tariff was the “most beautiful word in the dictionary”. Scholars may present a different opinion but it did indicate his economic plans should he prevail in next month’s election.
For an in-depth analysis of that historic vote and a look at what each candidate could mean for global currency markets, download our October-December Quarterly Forecast. Our report also includes predictions for the pound, euro and where your budget might be by Christmas.
In response to Trump’s comments, Rabobank warned that a protectionist trade policy would put the US dollar’s position as the global reserve currency of choice at risk. According to analysts, “The risk of trade tariffs could be sufficient to prevent a movement away from using the USD as the dominant invoicing currency”.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 3918 7255 to get started.
GBP: On the back foot
Wednesday’s inflation release was more unpleasant news for the pound. Sterling has now fallen by one cent against the euro and almost four cents against the US dollar since its highs of two weeks ago.
GBP/USD: the past year
EUR: Europe expects
Judging by financial markets, Europe widely expects the ECB to cut interest rates again today. Much of that perception is based on slowing growth data, although there is an argument that suggests it will want to match pace with the Federal Reserve. The euro could well be volatile around the decision.
GBP/EUR: the past year
USD: Quietly gaining
Just weeks before the election, the US dollar is lapping up any chance to fly below the radar. At least for now, it has made advances against its continental rivals but those could prove short-lived as the data resumes and focus shifts to 5 November.
EUR/USD: the past year
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