Sterling Update: GBP/EUR reaches a new two-year high

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

GBP

England came away with a draw from their second match against Denmark at the 2024 Euros. Although this is not what the nation had hoped for England, they remain at the top of their group as they prepare for their match against Slovenia next week Tuesday. Outside of the usual moral boost successful sporting events have, according to a report by Voucher Codes, the tournament is expected to provide a £2.75bn boost to the UK economy, from food and drink sales to electricals, souvenirs, and garden cooking.

Last week was eventful – regarding both currency volatility and the political sphere.

GBP/EUR reached a new two-year high. The pound also increased against the dollar last Wednesday following the US’s CPI inflation data release. The pair reached levels last seen briefly in March this year and July 2023 before we entered the period of dollar strength that dominated the second half of last year.

This week, UK inflation was reported to have fallen to the Bank of England’s 2% target for the first time since July 2021. The latest CPI inflation data was released Wednesday and came in as expected, dropping from 2.3% last month. Although overall inflation was in line with market forecasts, services inflation came in above expectation, and the Bank of England is still reportedly concerned about wage growth in the UK.

May’s inflation data is released just before the Bank of England’s monetary policy meeting yesterday, when the Monetary Policy Committee voted to hold rates steady at 5.25%. The decision was described as ‘finely balanced’ by the central bank.

The market is now forecasting the potential for a rate cut in August at 66.2%, up from around 30% before the meeting.

This morning, the week’s data releases finished with a raft of Purchasing Managers Index (PMIs) across the UK, Europe, and the US. The UK has remained in growth, with Manufacturing and Services floating at around 51.

EUR

The Russia-Ukraine war has been one of the most significant drivers of spiralling inflation in Europe and the rest of the world over the past few years. Last week, world leaders addressed the conflict at the Ukraine peace summit hosted in Switzerland.

The summit followed four earlier international meetings and aimed to conduct a high-level discussion on a comprehensive, just, and lasting peace for Ukraine. The summit had mixed success. Of the 92 countries that attended, 80 signed the agreement, with key countries such as Saudi Arabia, India, and South Africa abstaining and China not attending the summit. The outcome of the peace summit backed Ukraine’s territorial integrity but didn’t lay out steps to end the war.

The week started with the ECB’s President, Christine Lagarde, speaking about monetary policy and economic plans for the rest of the year this morning. Today, PMI data was released in Germany, France, and the Eurozone as a whole. Europe saw rangebound figures come in below expectations at 45.6 and 52.6, respectively. The euro has yet to find any support following the snap election called by France’s President Macron earlier in the month, which took markets by surprise and saw the single currency lose value against a host of major currencies.

None of the information contained in this document constitutes, nor should be construed as, financial advice. All rates are sourced from Forex Factory.