Sterling Update: Central Bank Decisions Shake Global Currencies

Here’s the latest currency news from our partner Moneycorp, to help you find out what your money is worth.

GBP

A slew of Central Bank meetings have dominated the economic agenda this week. The Bank of Japan (BOJ) surprised markets in the early hours of Wednesday morning by announcing a further rate hike, taking the central bank rate from 0.10% to 0.25% – a 50% chance of a hike was priced into the market. This is the highest interest rates have been in Japan since March 2008 and has resulted in further JPY strength this week.

The Federal Reserve announcement came on Wednesday evening where the FOMC voted to hold rates. The news was as expected, though Chair Powell’s press conference all but guaranteed a rate cut in September, with him saying The news was as expected, though Chair Powell’s press conference all but guaranteed a rate cut in September, with him saying “If we were to see inflation moving down … more or less in line with expectations, growth remains reasonably strong, and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting.”

Finally, the Bank of England announced on Thursday that it was cutting rates by 0.25%, taking the central bank rate to 5.00%, its first rate cut since March 2020. The market expectations ahead of the announcement were mixed, with most economists predicting a cut albeit the markets only pricing in around a 60% chance. They also signalled the bar is high for back-to-back cuts and the market is now pricing in the next cut for November, which coincides with the publication of its next Monetary Policy Report and Governor Bailey’s press conference.

EUR

It’s been an equally busy week across the Eurozone with Prelim Flash GDP on Tuesday revealing a steady quarterly pace of growth, which was slightly better than expected.

CPI July estimates for the Eurozone as a whole came in slightly better than expected at 2.6% YoY, versus 2.5% expected.

Spanish and French CPI came in slightly below expectations at 2.8% (versus 3.0% forecast), and 2.3% (versus 2.4% forecast), respectively. While German CPI came in slightly hotter at 2.3% (versus 2.2% forecast).

The euro has been playing second fiddle to other major currencies this week, with Japan, US and UK interest rate decisions, and that is unlikely to change next week without any major economic data points in the immediate future.

This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory.