Sterling Reaches New Highs: GBP/USD Surpasses $1.30 Amid UK Economic Optimism
Yesterday, the British pound reached its highest level against the US dollar since July 2023, reclaiming its position as the best-performing G10 currency so far this year. The GBP/USD pair has surged over 3% from its August low, closing above the crucial $1.30 mark for only the second time in 2024.
Sterling’s rise is fuelled by a weaker US dollar, favourable rate differentials, and an improving economic outlook for the UK. However, its gains against the euro have been more limited, as the pound struggles with the €1.17 level amid flows into the euro, which have pushed EUR/USD above $1.11. Data this week showed that British companies increased job advertisements for the first time this year, signalling strength in the UK labour market. The job-search platform also noted a rise in the number of job seekers, creating the most competitive hiring environment since May 2021, when the country was emerging from Covid-19 lockdowns. However, official reports and surveys indicate that vacancies are still declining, as the Bank of England closely watches labour market data for any signs of wage and price increases driven by worker shortages, which have been a concern in recent years.
The next key data points for GBP price movements will be the flash PMI figures released on Thursday, along with speeches from global policymakers at the Jackson Hole Symposium, which begins tomorrow.
Euro Hits 2024 High Above $1.11 as Fed Rate Cut Speculation Intensifies
The Euro climbed above $1.11, hitting a new high for 2024, as increasing expectations of a Fed rate cut continue to weigh on the dollar. The pair could see further short-term gains if the anticipation of cuts to the federal funds rate keeps global equity markets on the rise and volatility on the decline ahead of the Jackson Hole conference, despite overbought signals from momentum indicators. Bunds rose while European stocks saw a slight decline during Tuesday’s session, ending a six-day winning streak.
Sweden’s Riksbank lowered its policy rate for the second time this year to 3.5% and signalled the possibility of two or three more cuts before the end of the year, one more than previously projected in June. This updated forward guidance is more in line with current market expectations, which, at the time of writing, had 78 basis points priced into the OIS curve.
