Pound collapses on bleak BoE economic forecasts

Shifting central bank rate hike expectations have infused the currency market with considerable volatility over the past couple of weeks.

During this time, we’ve seen GBP/EUR plunge from €1.19 and €1.16, whilst EUR/GBP climbed from £0.83 to £0.85

Meanwhile, GBP/USD collapsed from $1.28 to $1.22, while EUR/USD retreated from $1.07 to $1.05.

 

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… 

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What’s been happening?

 

The pound nosedived at the start of May. This followed the Bank of England’s (BoE) latest interest rate decision and economic forecasts.

While the bank hiked rates, its bleak outlook for the UK economy sparked a sharp slump in GBP exchange rates.

The US dollar on the overhand has rocketed higher, with the Federal Reserve delivering its largest interest rate hike in over a decade, at the same time that risk-off flows underpinned safe-haven demand.

Meanwhile, the euro has benefitted from increasingly hawkish rhetoric from the European Central Bank (ECB), although uncertainty over the war in Ukraine and its impact on the Eurozone economy have limited any resulting gains.

 

What do you need to look out for? 

Looking ahead, the conflict in Ukraine is likely to continue to influence currency markets as it enters its fourth month.

The resulting uncertainty could limit the upside potential for the pound and euro, particularly if Moscow moves to further restrict gas supplies to Europe.

Meanwhile, global recession fears could reinforce the current uptrend in the US dollar, especially if China continues to ramp up it Covid restrictions.

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