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17 January 2023
Staying on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for over the next couple of weeks…
Central bank dynamics have driven the currency markets over the last fortnight, with the euro rising and the US dollar falling as markets adjust expectations for further interest rate rises.
GBP/EUR fell from almost 1.14 to a three-and-a-half-month low of 1.12, while EUR/GBP traded between 0.88 and just shy of 0.89.
Meanwhile, GBP/USD traded between 1.19 and just below 1.23, settling around 1.22, and EUR/USD touched a low of 1.05 before hitting a nine-month high of 1.08.
The pound fluctuated over the past fortnight. Ongoing worries about the UK’s darkening economic outlook pressured the pound, with strike action intensifying across the public sector. However, an upbeat mood in global markets also offered support to the increasingly risk-sensitive currency.
A larger-than-forecast cooldown in Eurozone inflation undermined the single currency through the first week of 2023. The following week, however, European Central Bank (ECB) officials reiterated their commitment to raising interest rates, which sparked strong gains in EUR.
Mixed economic data caused turbulence in the US dollar at the beginning of January, with some sharp spikes and slumps. The ‘greenback’ then headed steadily lower as the month went on. Cooling US inflation dented Federal Reserve rate hike bets, which dragged USD lower.
The UK CPI for December could cause big movement in the pound. Economists expect a modest deceleration, but if inflation cools more than forecast, as it did the previous month, then Sterling could slump.
For the euro, forecast improvements in the Eurozone services and manufacturing PMIs could see EUR post further gains. Sentiment among German investors, businesses and consumers is also expected to improve, which may add to EUR’s upside.
Across the Atlantic, the US fourth-quarter GDP growth rate may prompt movement. Towards the end of the month, the ‘greenback’ could tumble if the latest PCE price index data shows that inflationary pressure continue to ease.
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