Sterling surged to its highest level against the euro in over two and a half years, driven by expectations that the European Central Bank (ECB) will adopt a dovish stance this week. Markets are pricing in a 25-basis-point rate cut on Thursday, with additional cuts of more than 100 basis points expected by July 2025.
In contrast, the Bank of England is forecasted to hold steady on its current policy when it meets next week, adding to sterling’s recent momentum.
Market Highlights: Currency and Inflation Trends
- Euro and Yen Under Pressure: Both the euro and yen faced significant declines yesterday, falling approximately 0.5% against the dollar and sterling.
- US Business Optimism: The US NFIB Small Business Optimism Index climbed to 101.7 in November, its highest level since June 2021, up from 93.7 in October. While this reflects growing optimism in a more business-friendly environment, the data had minimal impact on markets.
What’s Next for the Dollar?
Attention now shifts to November’s US CPI inflation report, due later this week. Analysts expect the headline inflation rate to edge up slightly to 2.7% from 2.6%, with the core rate holding steady at 3.3%. The release could introduce event risk for the dollar, shaping its direction as markets digest the latest data.
How These Trends Impact Your Business
Sterling’s strength and the ECB’s anticipated rate cuts highlight opportunities in the currency markets. Whether you’re hedging risks or capitalising on favourable rates, understanding these shifts is key to optimising your strategies.
At Qumoney, we offer expert insights to help you navigate market movements and protect your business against volatility. Reach out to one of our specialists today to explore tailored solutions for your needs.