UPS AND DOWNS

Central bank rate decisions inspire volatility in the pound, euro and US dollar

STAYING on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for over the next couple of weeks…

Latest Currency News

The pound, euro and US dollar all traded with notable volatility over the past fortnight, following the latest rate decisions from the Bank of England (BoE), European Central Bank (ECB) and Federal Reserve.

During this time GBP/EUR fell from almost 1.13 to a four-month low of 1.11, while EUR/GBP climbed to 0.89.

At the same time, GBP/USD slumped from 1.23 to 1.20, , and EUR/USD touched a nine-month of 1.10 before slipping to 1.07.

WHAT’S BEEN HAPPENING?

A dovish assessment of the BoE’s first interest rate decision of the year sent the pound sharply lower over the past couple of weeks. While the BoE raised rates by 50bps GBP investors appear convinced the bank is nearing the end of its hiking cycle. It was a similar story for the euro over the past two weeks. The ECB also opted for a 50bps hike, but undermined this after implying it will pursue just one more increase before pausing its tightening cycle.

Meanwhile, USD exchange rates witnessed some of the most volatile movements. After falling to a multi-month low in the wake of a dovish 25bps rate hike from the Fed, the US dollar skyrocketed as a bumper payroll print revived Fed rate hike expectations.

WHAT DO YOU NEED TO LOOK OUT FOR?

The UK’s upcoming GDP release will be a key focus for GBP investors over the next couple of weeks. The pound is likely to soar if the UK managed to avoid slipping into a recession at the end of 2022. Meanwhile, the threat of an escalation of the war in Ukraine may cast a long shadow over the euro through the first half of February.

Across the Atlantic, the