Top Currency Pairs (Monday 25th October 9:00 UTC):
GBP/USD: 1.37769 (Last week: 1.37203)
EUR/USD: 1.16516 (Last week: 1.15819)
GBP/EUR: 1.18240 (Last week: 1.18464)
The Pound has found strength recently amid the Bank of England's latest interest rate expectations. In particular, the GBP/EUR exchange rate traded at yearly highs last week, reaching 1.18717. A cool inflation report released on Wednesday combined with fears over Covid-19 restrictions potentially being reintroduced in the UK weakened the Pound heading into the weekend. The currency will now need support from Rishi Sunak's Autumn budget, which will be released on Wednesday, to push on further against both the Euro and the Dollar.
The Euro was hit last week by the German economic institutes latest forecasts, which saw growth slashed for this year as global supply chain issues and remaining restrictions are pressuring Europe's largest economy. German economic data will drive the Euro this week, with IFO business climate, unemployment, and inflation figures all being released. The inflation number will be important as it will be announced on the same day as the ECB interest rate decision. It is expected that the ECB will be dovish, but with rising energy prices and higher inflation, there is mounting pressure to discuss tapering.
The Dollar could receive some much needed support from the US Federal Reserve tightening monetary policy, which would make them one of the first major central banks to do so. The Fed indicated that it could begin tapering as soon as November, with interest rate hikes likely to happen next year. Jerome Powell was quoted at a virtual event saying "I do think it is time to taper, and I don't think it is time to raise rates." This has had a mixed impact, as despite looking very likely to taper in the near future, investors are taking it as a signal that other major central banks will hike rates long before the Federal Reserve.
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Disclaimer: This is not investment advice; it is for informational purposes only.