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US dollar rebounds on upbeat payroll data

We have seen some notable volatility in the currency market over the past couple of weeks, particularly in the US dollar, which rebounded from multi-month lows.

During this period, we’ve seen GBP/EUR climb from €1.15 to €1.16, while EUR/GBP slipped from £0.86 to £0.85.

Meanwhile, GBP/USD climbed as high as $1.27, before falling back to $1.25, while EUR/USD briefly struck $1.10, before retreating to $1.07.

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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…

What’s been happening?

The US dollar mounted a convincing recovery over the past couple of weeks. This rebound was supported by a souring of market sentiment and an eroding of Federal Reserve interest rate cut speculation, following a stronger-than-expected US payroll report.

In contrast, the euro has faced headwinds as a sharp cool down in Eurozone inflation has convinced EUR investors that the European Central Bank (ECB) is considering up to three rate cuts in 2024.

At the same time, while the absence of any notable UK economic data has left the pound vulnerable to a deterioration in market sentiment, its losses have been kept in check by hawkish Bank of England (BoE) expectations.

What do you need to look out for?

The focus now turns to the BoE’s, ECB and Fed’s final interest rate decisions of 2023. While no policy changes are expected this month the banks’ forward guidance could trigger significant volatility.

In terms of the BoE, if the bank leaves the door open to another hike and reiterates that rates are likely to remain higher for longer this could bolster the pound.

Meanwhile, both the ECB and Fed are expected to hint at possible rate cuts next year. However, if either bank pushes back against speculation the first cut could come in the first half of 2024, then their respective currency may strengthen.

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