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The European Central Bank is the centre of attention this week in a key decision for the euro.
Last week was a topsy turvy one for the pound as it fought back against recent weakness in stages. Friday’s news that US PPI fell to zero in September was enough to instigate a restrained GBP/USD rally to close proceedings.
Over the course of last week, GBP/EUR recovered from several falls to finish near where it began. EUR/USD followed a similar trajectory, trading in a narrow band with a couple of small setbacks. The euro lost just under half a cent to the US dollar by Friday afternoon.
UK economic growth returned to positive territory in August, injecting a bit of momentum into sterling after several weeks of falls. That news was good for chancellor Rachel Reeves as she readies her much anticipated autumn budget, yet would it lead to success for the pound heading into 2025?
You can find the answer to that question and many more in our brand-new Quarterly Forecast. Find out how the crunch US election could affect your budget, plus plenty more analysis from the world’s leading banks. Download your copy today.
The European Central Bank (ECB) meet again this week to decide the path of interest rate reductions. Markets are fairly split between another cut and a hold at the moment. Time will tell who is right but it will be a nervous wait for the euro.
With PPI falling, the University of Michigan consumer sentiment survey followed suit in September, falling from a five-month high set last month. High prices and personal income remained at the forefront of people’s minds, as did the increasingly prominent US election in November.
Here’s what to look out for this week…
The UK is back in the spotlight on Tuesday with unemployment data for August. Germany’s ZEW economic sentiment index then follows, along with a handful of Federal Reserve speakers after the European session close.
Wednesday’s UK inflation will be closely watched as an indicator of the Bank of England’s next move.
It’s all eyes on the ECB on Thursday, when Christine Lagarde and co announce their latest interest rate decision. That’s followed by the customary press conference, as well as retail figures from the USA.
The UK’s own retail figures and US building permits are the two key focuses on a slightly quieter Friday.
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GBP: Inflation gauge
Wednesday’s inflation release is the key data point for sterling this week. A fall below 2.2% would likely be negative for the pound, whereas an unexpectedly hot set of figures could support it moving forward.
GBP/USD: the past year
EUR: ECB setting the pace
The ECB has been forced to move interest rates lower than its major rivals this year. This has resulted in some weakness for the euro, which could be set to continue on Thursday. ECB president Christine Lagarde knows she has to tread carefully to keep the euro afloat.
GBP/EUR: the past year
USD: Data on the backburner
Two disappointing data release back to back on Friday would usually have spelled a late-week collapse for the US dollar. It is a sign of how big an impact safe-haven dynamics are having that the US dollar saw just a minor fall against its rivals as the news came out.
EUR/USD: the past year
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