Sterling slips amid BoE rate cut talk and Euro strength
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Daily Currency Update
The British Pound has been steadily losing ground since late May, and several factors are behind the decline.One major reason is growing demand for the euro. Investors around the world are shifting their positions and protecting themselves against risks in the US, especially with uncertainty linked to Donald Trump. Analysts at ING say the euro is gaining strength because it's becoming more popular as a reserve currency, a safe place to hold money, which has made it more attractive and pushed up its value.
At the same time, the UK economy has shown signs of slowing down. This has increased expectations that the Bank of England might cut interest rates more quickly and more deeply than previously thought. With the European Central Bank likely to hold rates steady for now, the contrast in direction is putting extra pressure on the Pound.
Key Movers
The FX market is keeping a close eye on central bank developments this week, with the European Central Bank also in the spotlight. While no shift in eurozone interest rates is expected, the single currency briefly touched a two-week high earlier in the day, buoyed by cautious sentiment.Tensions between the EU and the US continue to bubble, with no breakthrough in sight ahead of the looming 30% tariffs set to take effect from 1st August. EU diplomats on Monday indicated they’re weighing a broader range of counter-measures, as hopes for a deal wane, a development that could add further pressure to the euro in the coming weeks.
Meanwhile, the dollar’s early-month bounce appears to be running out of steam. The euro is largely range-bound heading into Thursday’s ECB meeting, which is widely seen as a holding pattern, with markets looking ahead for any clues on future policy moves.
Expected Ranges
- GBP/USD: 1.3515 - 1.3595 ▲
- GBP/EUR: 1.1505 - 1.1585 ▲
- GBP/AUD: 2.0555 - 2.0645 ▲
- EUR/USD: 1.1715 - 1.1795 ▲