Over the past week, the Pound Sterling has not only retained its recent gains but also saw notable spikes against both the EUR and the USD. Particularly impressive was the performance of the GBP/EUR pairing, which reached its highest level in two and a half years.
The Eurozone was thrown into turmoil on Sunday. Following heavy losses in EU parliamentary elections, Emmanuel Macron announced a shock snap election in France. With the far-right surging in popularity not just in France but across Europe, there are now legitimate concerns regarding the stability of the EU. Consequently, the Euro took a significant hit this week, much to the delight of Euro buyers.
With limited data released in both the Eurozone and the UK, the focus turned to some disappointing claimant count change figures from the UK. Forecasts predicted a final figure of 10.2k, but the actual release came in at 50.4k. Despite this, the GBP/EUR stabilised at this elevated level, although its future stability remains uncertain.
The U.S. was the focal point of the week data-wise, posting several key results, including the latest Federal Reserve interest rate decision. The week started quietly with limited data until Wednesday, but it was worth the wait. The afternoon release of CPI figures and the evening Fed interest rate decision, followed by Jerome Powell’s statements regarding future policy, provided significant market movement.
CPI was expected to remain at its previous level of 3.4% year-over-year; however, final figures came in at 3.3%. This marginal drop was enough to see the USD weaken considerably, allowing the GBP/USD pairing to reach its highest level since March. This led into the Fed decision, where a hold on interest rates was highly anticipated. As expected, the forecast was correct, and it was fully priced into the market, resulting in limited movement. Powell’s speech, especially after the soft CPI figures, became crucial for markets as traders attempted to decipher future policy. Turns out it didn’t take much to decipher his comments with Powell, relatively brazenly, declaring he expects only one rate cut this year, with November likely to be the month it happens, perhaps in an attempt to shore up the Dollar following heavy losses.
Looking ahead to next week, UK data will take centre stage with the release of CPI, Retail Sales, and PMI manufacturing and services figures. The Bank of England will also announce their latest interest rate decision, suggesting a week of high volatility. Unfortunately, the gains the Pound has made recently could be at risk. For the Eurozone and the U.S., there is little data expected until Friday, when they will join the UK in releasing PMI services and manufacturing figures.
