Sterling holds at multi-year highs against the euro and US dollar

30 September 2024

Weekly Market Headlines:

UK GDP data indicates weaker growth. This morning’s UK GDP report shows the economy grew less than expected in the second quarter, raising concerns about its overall health.
Pound holds near 2½ – year high against the euro. Today, £50,000 buys €2,450 more than it did in January, and €2,015 more than in August.
Key PMI and Inflation Data. In the week ahead, keep an eye on PMI data, which could impact short-term FX market movements.

Contact your account manager on +44 (0) 204 506 5672 to explore Lumon’s options for managing risk.

Sterling remains resilient, largely due to expectations that the Bank of England will maintain current interest rates, while the European Central Bank (ECB) and US Federal Reserve are expected to cut rates in the coming months. The ECB meets in October with a high likelihood of a cut, while the US may cut by 0.50% at their next meeting.

If you’re planning international transfers, the pound’s strength means better exchange rates, especially against the euro. However, with potential market shifts due to upcoming economic data and central bank decisions, it’s worth considering locking in rates sooner rather than later.

While the UK grew by 0.5% rather than the forecasted 0.6%, markets aren’t overly concerned as this represents older data. However, with economic stagnation over the summer, recession fears haven’t completely disappeared, creating a tough challenge for Chancellor Rachel Reeves and Prime Minister Keir Starmer to boost growth.

Today marks the end of both the month and the third quarter, which could bring unexpected movements as traders adjust their positions for the new period.

This week’s PMI data, US Non-Farm Payroll, and unemployment numbers could influence FX markets, impacting global risk sentiment. These data points could create volatility for not just the US dollar but also other key pairings like GBP to EUR.