With the New Year holiday limiting economic data releases, market movements are expected to remain flat, and volatility is likely to be modest. However, ongoing developments in the eurozone, UK, and US are keeping investors on alert.
Euro Declines as Interest Rate Concerns Mount
The euro weakened on Friday against major rivals, marking its fourth consecutive weekly decline. This drop follows concerns over a widening US-eurozone interest rate differential, compounded by cautious remarks from ECB President Christine Lagarde.
Lagarde’s comments have increased the probability of a 0.25% ECB rate hike in January, rising from 55% to 65%, signalling a more cautious approach to monetary policy in the eurozone.
Pound Under Pressure Against the Dollar
The GBP/USD currency pair continues to struggle amid:
- Flat UK GDP growth in Q3.
- Mixed retail sales data.
- Rising public sector borrowing.
These factors, coupled with a strong US dollar, have placed the pound under sustained negative pressure. Without significant changes in economic data or market sentiment, this trend is expected to persist.
Key Takeaway for Businesses
With the euro’s decline and the pound facing headwinds, businesses involved in international trade should stay vigilant. Modest volatility may still present opportunities to hedge currency risks or lock in favourable rates.
Speak to Qumoney’s experts today to explore strategies tailored to your needs, ensuring your business is prepared as markets evolve into 2025.