Monthly Currency Report – July 2024

Friday 12th July – The pound (GBP) continued its upward trend on Friday, concluding a robust week of gains fueled by optimism. Increased hopes for political stability in the UK, improved GDP figures, and recent hawkish remarks from Bank of England officials heightened demand for the currency.

The euro (EUR) displayed mixed performance towards the end of the week, lacking clear direction due to a scarcity of significant Eurozone data. Although a weaker US dollar (USD) provided some support to the euro, its safe-haven status struggled against more volatile currencies amid a positive market sentiment.

On Friday, the US dollar experienced declines as investors anticipated a potential interest rate cut from the Federal Reserve, following Thursday’s softer inflation report. Selling pressure intensified after the US consumer sentiment index unexpectedly dropped for the fourth consecutive month in July, indicating a decrease in consumer inflation expectations.

Thursday 11th July

The pound (GBP) gained strength yesterday following the release of UK GDP data that surpassed expectations. The British economy recorded a growth of 0.4% in May, outpacing forecasts of 0.2%, which contributed to the pound’s rise.

Pressure mounted on the euro (EUR) yesterday as Germany’s final consumer price index for June indicated a slowdown in inflation for the Eurozone’s largest economy. Despite this, the euro benefited from its strong negative correlation with the declining US dollar (USD), preventing more significant losses.

The US dollar fell sharply yesterday after June’s CPI data revealed a greater-than-anticipated easing in inflation. Both headline and core inflation rates dropped more than expected, with the headline figure reaching a one-year low. This development heightened speculation about a potential interest rate cut from the Federal Reserve in September, with market odds jumping from below 70% to nearly 85%.

Wednesday 10th July

The pound (GBP) surged yesterday after comments from Bank of England Chief Economist Huw Pill. Speaking at Asia House in London, Pill stated that it remained an “open question” whether the BoE was prepared to cut interest rates, highlighting concerns over the “uncomfortable strength” in wage growth. Following his remarks, the likelihood of a rate cut in August dropped from 62% to 50%, leading to a boost for Sterling.

The euro (EUR) displayed mixed performance yesterday, hindered by a lack of data and ongoing political uncertainty in France. Despite this, the euro found some support due to its strong negative correlation with a weakening US dollar (USD).

The US dollar weakened yesterday as investors adopted a cautious stance ahead of the upcoming consumer price index report. Anticipation of a potential easing in inflation left the “greenback” struggling to gain traction.

Tuesday 9th July

The pound (GBP) experienced limited movement yesterday as enthusiasm surrounding the recent UK election and Labour’s significant victory began to fade. In the afternoon, Sterling slipped without any obvious reason for the shift, possibly due to profit-taking actions by traders.

The euro (EUR) remained subdued yesterday, affected by a lack of data from the Eurozone and ongoing political uncertainty in France. The recent election in France resulted in a hung parliament, raising fears that a political impasse could create challenges for the Eurozone’s second-largest economy.

The US dollar (USD) gained ground yesterday, supported by a slight increase in US Treasury yields. Afternoon remarks from Federal Reserve Chair Jerome Powell also bolstered the dollar, as he cautioned against premature interest rate cuts, emphasising the need for more evidence of easing inflation.

Monday 8th July

Investors responded positively to the new UK government’s initial actions, as the Labour Party moved forward with its growth-boosting agenda. Additionally, hawkish remarks from outgoing Bank of England (BoE) policymaker Jonathan Haskel bolstered the pound (GBP). Haskel expressed a preference to maintain interest rates at the bank’s upcoming August meeting instead of opting for a cut.

The euro (EUR) experienced volatility on Monday following the second round of the French parliamentary election, where the far-right National Rally (RN) party finished third, trailing behind a centrist coalition and a left-wing alliance. Investors were relieved that the RN did not gain power, given its “unsustainable” fiscal policies. However, the uncertainty stemming from a hung parliament limited the euro’s upward potential.

The US dollar (USD) remained subdued at the beginning of the week, lingering near recent lows due to a lack of economic data from the US. A shaky market sentiment did not provide the safe-haven currency with the usual support, while expectations of a potential rate cut from the Federal Reserve in September kept the dollar under pressure.

Friday 5th July -The pound (GBP) saw moderate gains on Friday after the Labour Party secured a decisive victory in the UK general election. Investors responded positively to the results, but since a Labour win was largely anticipated, Sterling’s movement was limited.

The euro (EUR) ended last week on a mixed note, as declining German industrial production and weaker Eurozone retail sales weighed on the currency. However, EUR found some support due to its strong negative correlation with a weakening US dollar (USD).

The US dollar hit multi-week lows on Friday, pressured by falling US Treasury yields. A mixed non-farm payrolls report also affected USD; while June’s job numbers surpassed expectations, a significant downward revision to May’s results dampened any potential gains.

Thursday 4th July

The pound (GBP) remained steady yesterday as polling stations opened across the UK for the general election. Investors were cautious, refraining from making significant changes to their positions in the pound, which kept Sterling subdued.

The euro (EUR) showed resilience despite an unexpected drop in German factory orders in May. Support came from the European Central Bank’s (ECB) latest meeting minutes, revealing that not all policymakers supported last month’s interest rate cut. However, concerns about economic growth limited the euro’s gains.

The US dollar (USD) weakened slightly as the Independence Day holiday led to quiet trading conditions in the US. Following Wednesday’s weaker economic data, USD trended lower, though overall movement was limited.

Wednesday 3rd July

The pound (GBP) gained traction yesterday after the UK’s final services PMI for June was revised upwards. The index posted a score of 52.1, improving on the preliminary estimate of 51.2. This better-than-expected performance in the UK services sector provided support for Sterling.

The euro (EUR) experienced mixed movements as lacklustre data caused some uncertainty. The Eurozone’s final services PMI was adjusted slightly higher, indicating a smaller slowdown in activity than initially expected. However, cooling producer price inflation in the Eurozone raised the possibility of further European Central Bank (ECB) interest rate cuts later in the year.

The US dollar (USD) declined on Wednesday after the ISM services PMI unexpectedly indicated a contraction in June. This was further impacted by the latest ADP employment report, which revealed a slowdown in job creation. The release of the Federal Reserve meeting minutes in the evening resulted in minimal market reaction.

Tuesday 2nd July

The pound (GBP) strengthened against several currencies yesterday, despite the absence of new UK economic data. Improved market sentiment supported the risk-sensitive pound.

The euro (EUR) came under pressure after the Eurozone’s preliminary consumer price index for June showed a decrease in headline inflation, dropping from 2.6% in May to 2.5%. This fueled speculation about additional interest rate cuts from the European Central Bank (ECB) later this year.

The US dollar (USD) weakened following comments from Federal Reserve Chair Jerome Powell, who noted that recent data points to a ‘disinflationary path’ for the US. However, an unexpected rise in US job openings helped cushion the dollar, easing some concerns about the strength of the labour market.

Monday 1st July

The pound (GBP) showed mixed performance yesterday following the release of the UK’s final manufacturing PMI for June, which was revised down, indicating an unexpected decline in factory activity. Despite this, the PMI report included some positive indicators suggesting ongoing recovery in the sector.

The euro (EUR) reached multi-week highs after the first round of France’s legislative election. Investors were relieved that the far-right National Rally (RN) party did not perform as strongly as some polls had anticipated, reducing the likelihood of the RN gaining an outright majority and pushing forward its populist fiscal policies.

The US dollar (USD) started the week on a weaker note due to the lingering effects of Friday’s cooling US inflation data. However, the dollar managed to recover in the afternoon as a worsening market mood boosted the appeal of the safe-haven currency.

Currency Ranges for the month:

GBP/USD: Low:   High:

GBP/EUR: Low:   High:

EUR/USD: Low:    High:

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