Sterling hit another impressive milestone on Tuesday as it reached its highest level over the euro in almost three years. This came as markets hardened their view that the European Central Bank (ECB) would cut interest rates by a further 0.25% on Thursday.
While the pound could enjoy its success, events may turn against it later in the week. The ECB’s decision is far from a certainty, while October’s GDP figures could be a further drag.
GBP/USD fluctuated slightly yesterday but avoided any major moves ahead of US inflation data this afternoon. It was a poor day all round for the euro, which sunk by half a cent against the US dollar and showed little sign of perking up as the day progressed.
The European Union (EU) government in Brussels is to advise member states not to afford the UK greater access to its energy market. Due to energy cables underneath the North Sea, some degree of cooperation is expected to reduce consumer prices and create a more efficient system. In the aftermath of Brexit, Brussels is reported to be urging members not to “cherry pick” rules and regulations.
In the US, business confidence continues to build at a rapid (some would say hysterical) pace. The National Federation of Independent Business (NFIB) small business optimism index climbed to its highest level since June 2021 last month.
The Chinese yuan continued to climb yesterday and stocks in Shanghai rallied as the government appeared to take a more active role in managing the country’s stalling economy.
The Australian dollar meanwhile fell sharply against its rivals as the Reserve Bank of Australia stubbornly stuck with interest rates at 4.35%.
In Syria, The Unite Nations warned Israel to halt its attacks over fears it could disrupt the transition of power. Currency markets continue to monitor the news to pre-empt any further turbulence from the flow of events.
While GBP/EUR is close to its strongest level since Brexit, there are simply too many “known unknowns” to predict its strength will endure. If you are committed to a major transaction overseas, talk to your account manager about locking in your rate. You can reach them on 020 7898 0541.
