Excel Currencies Blog

As I type, the £-€ exchange rate is trading at a 3-week low. Overall the pair is still up 0.5% on the month, but we expect to see a 1%+ change from the current position once we learn of the BoE's interest rate decision. The £-$ exchange rate is at a 2-week low, but is still up 1.5% on the month as it stands.

This week, we enter a stick or twist moment for anyone with exchanges in the pipeline. The main event is the UK's interest rate decision, which money markets now put an interest rate cut at just over 50% likely to happen.

Money markets have been terrible at predicting when a central bank will cut interest rates for well over a year now, so we shouldn't get too excited that one will happen. But the 'bad luck' has to run out at some point and it does feel like a rate cut will happen sooner rather than later.

If one arrives this month, GBP will undoubtedly weaken. By how much is hard to predict, but if we had to guess we would imagine a 1% devaluation. If one doesn't come, then all bets will be for a rate cut next month (dependent on what the MPC say of course). In this scenario we should see an immediate GBP bounce..



EUR
Last Thursday, €-£ saw its biggest daily gain since April. This was on the back of investors betting a UK interest rate cut is imminent. Before that decision and following meeting though, the Euro has the chance of putting more pressure on GBP or giving up the recent gains.

All the major players have a pretty stacked economic calendar this week and the Euro-Zone is no different. GDP & inflation are key releases and i'm sure they won't be overshadowed by the 'on-paper' more significant interest rate releases. German data puts an extra spice onto things this week being the 'sick' child of the European economy at the moment. 



USD
All eyes will be on the Fed this week with their interest rate decision and following press conference. No rate cut is expected, but you never know! Guidance on when one will arrive is key, but for now the USD continues to make small gains across the board since the mini stock market crash a couple of weeks ago.