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GBP/EUR climbs to fresh 20-month high

currency-newsGBP/EUR climbs to fresh 20-month high
The pound euro exchange rallied again on Friday, climbing to a fresh 20-month high, amidst Bank of England (BoE) rate speculation and Brexit optimism.

Sterling appears to be consolidating these gains at the start of this week, with GBP/EUR buoyed at €1.1861 and GBP/USD muted at $1.3736. GBP/CAD is rangebound at C$1.7028, while GBP/AUD and GBP/NZD hold steady at AU$1.8559 and NZ$1.9437 respectively.

Coming up, will data showing a slowing of US industrial production last month, weaken the appeal of the US Dollar later today?

What’s been happening?

The pound closed last week’s session on a high, rocketing up against the majority of its peers, as the currency continued to be underpinned by expectations the BoE could hike interest rates before the end of the year.

Reinforcing Sterling’s gains was some Brexit optimism, as European Commission Vice President, Maroš Šefčovič and UK Brexit Minster David Frost, met in Brussels to discuss the EU’s new proposals for the Northern Ireland protocol.

The US dollar, meanwhile, initially stumbled on Friday, as the currency fell in tandem with US Treasury yields.

However, the ‘greenback’ was then able to claw back some of these losses later in the session, after the latest US retail sales figures printed well above expectations, with a surprise 0.7% expansion of sales growth in September.

At the same time, the euro was left to languish at the end of last week’s session as another European Central Bank (ECB) policymaker dismissed inflation concerns.

What’s coming up?

Turning to this week’s session, the pound already looks to be off to a strong start after BoE governor Andrews Bailey said the bank will ‘have to act’ to curb inflation in the UK.

Given the BoE’ preoccupation with inflation, a key focus this week is likely to be on the UK’s consumer price index.

If September’s CPI release reports another above forecast rise in inflation, GBP investors may grow more confident that the BoE could hike interest rates before the end of the year, likely lifting the pound in the process.

On the other side of the Channel, the spotlight for EUR investors is likely to be on the Eurozone’s upcoming PMI figures, in which another soft reading could extend the downtrend in the euro.

In the meantime, the publication of the latest US industrial production figures could provide some fresh direction to the US dollar today. Will a slowing of US factory output last month weigh on USD exchange rates this afternoon?
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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