Euro rallies on US dollar weakness

Daily Currency Update

GBP/EUR has hit another multi-month low this morning as the euro advances on the back of a retreating dollar. The move has been triggered by Tuesday's inflation data from the US which seems to have put to bed the idea that the US Federal Reserve will need to raise interest rates again. With a sudden drop in the dollar’s value, the main benefactor has been the euro.

Even though there has been no improvement in Eurozone data or any change in the European Central Bank’s messaging regarding monetary policy, the knock on effect of a suddenly weaker US dollar is a stronger euro, given it is the world’s second most traded currency.

GBP/EUR is heading down towards 1.14 at the moment, its lowest level since early May and EUR/USD, which many thought could be heading to parity a few weeks ago, is up to 1.0850.

The GBP/USD rally on the back of the US CPI print seems to have faded and its value is likely being impacted by uncertainty over the UK's economic health, a larger than expected drop in CPI yesterday, as well geopolitical uncertainty over the Israel/Hamas conflict. Another factor that could weigh on sterling is domestic political uncertainty as UK PM, Rishi Sunak, faces criticism from all sides for a variety of decisions/policies. After touching 1.25 a couple of days ago, GBP/USD is now at 1.2395.