It was a positive week for the EUR despite the BoE hiking interest rates. The EUR strengthened sharply off the back of the interest rate hike decision. The was due to the dovish tone of BoE governor Mark Carney’s speech afterwards signalling an intention to leave interest rates at 0.5% for some time.
The decision to remand eight members of the deposed Catalan administration dented the EUR at the back end of last week. The political situation in Spain could weigh heavy on the EUR in the coming weeks which has presented a great selling opportunity as it is still strong across the board as confidence in the Eurozone could weaken the longer this goes on.
Last Thursday saw a volatile day for the Pound as the Bank of England expectedly hiked interest rates to 0.50% for the first time in 10 years. Surprisingly the pound fell around 2% as following the rate hike Mark Carney said that we wouldn’t be seeing another rate hike anytime soon. This announcement left investors disappointed and had a negative view on the UK economy, leaving Sterling to drop across the board. GBP/EUR hit lows of 1.118 whilst GBP/USD fell into the 1.30s for the first time in 4 weeks.
The Greenback finished the week strongly against its major counterparts gaining almost 2.5 cents against Sterling (1.3133) and reaching 1.16 against the EUR. This was on the back of unemployment data from the US which saw 29k jobs added with unemployment dropping by 0.1%. Although U.S. wage growth data disappointed, analysts remain optimistic that wages will pick up, and there was little change in market expectations for the Fed to raise interest rates in December for a third time this year. Investors were, however, wary of selling the greenback aggressively with the passage of the U.S. tax bill due this week. We expect the USD to trade relatively flat this week, with advantages to be had when selling the greenback.
WEDS 8th November
EUR – Non-monetary policy’s ECB meeting
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