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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…

Latest currency news

GBP exchange rates firmed in the first weeks of January as UK Covid optimism and Bank of England (BoE) rate hike bets boosted the pound.

GBP/EUR climbed from €1.19 to touch €1.20 – a 23-month high – and EUR/GBP slipped from £0.84 by about half a penny.

GBP/USD rose from $1.35 to a ten-week high of $1.37, while EUR/USD ranged between $1.13 and $1.15 before settling at $1.14.

What’s been happening?

Sterling strengthened as the UK avoided tougher Covid restrictions and traders placed bets on another Bank Rate rise at the BoE’s next meeting.

Policy divergence undermined the euro as the European Central Bank (ECB) looks set to stay its current dovish course. However, the single currency enjoyed its negative correlation to a weakening US dollar.

The downside in USD came despite hawkish comments from Federal Reserve officials, as markets have already priced in aggressive action from the Fed. Additionally, an improving market mood weighed on the safe-haven currency.

What do you need to look out for?

If UK inflation beats market forecasts this week, it could increase the likelihood of a BoE rate hike next month, thereby boosting the pound.

With central bank policy divergence weighing on EUR, speeches from ECB officials and the account from their last policy meeting could affect the euro.

The Fed interest rate decision comes at the end of the month. Economists don’t expect the US central bank to hike rates until March, but the meeting is likely to impact the US dollar nonetheless.

 

Our friends at Currencies Direct

At Currencies Direct we’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Since 1996 we’ve helped more than 325,000 customers with their currency transfers, just pop into your local Currencies Direct branch or give us a call to find out more.

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