currencies direct transparent logo

Fluctuating central bank expectations stoke currency volatility

We witnessed some notable swings in the currency market over the past couple of weeks, as investors revised interest rate expectations for the Bank of England (BoE), European Central Bank (ECB) and Federal Reserve.

During this time, we’ve seen GBP/EUR slip from €1.17 to €1.16, while EUR/GBP briefly climbed to £0.86, before falling back to £0.85.

Meanwhile, GBP/USD traded between $1.27 and $1.25, while EUR/USD retreated from $1.09 to $1.08.

Latest currency news

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…

What’s been happening?

The pound faced resistance in mid-August as the currency was pressured by UK recession fears. Sterling sentiment then recovered toward the end of the month thanks to rising BoE rate hike bets.

In contrast, the euro was initially bolstered as stronger-than-expected Eurozone inflation figures boosted ECB rate hike bets. Before walking back these gains in response to dovish comments from an ECB policymaker.

The US dollar rallied in mid-August amid rising rate hike bets ahead of Fed Chair Jerome Powell’s Jackson Hole speech. USD exchange rates were then rocked at the end of the month as a hardening of Fed rate hike expectations helped to offset risk-on sentiment.

What do you need to look out for?

Looking ahead, the ECB’s upcoming rate decision is likely to be the primary focus over the next couple of weeks. Expect to see the euro plunge if the bank confirms its hiking cycle has come to an end.

For USD investors the focus will be on the latest US consumer price index. Another rise in inflation is likely to further underpin Fed rate hike bets.

Meanwhile, could another record increase in UK wages bolster BoE rate hike speculation and revive the pound?

Free Currency Transfers

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 430,000 customers with their currency transfers, just pop into your local Currencies Direct branch or give us a call to find out more.