Currency news

GBPEUR highest since April 2022

Head of FX Analysis at Equals Money
-
3
min read
Publish date
24/09/24
    • GBP gains on growth divergence
    • China introduces stimulus measures


    Yesterday's currency recap

    GBPEUR hit new highs after September PMI numbers illustrated the growth divergence between the UK and EU. Based on interest rate policy divergence between the Bank of England and its peers GBP has been on a stellar run as of late. This is making an even stronger case for GBP support from the markets.

    Overnight, the People Bank of China introduced stimulus measures in a bid to bolster equities, so, to no surprise, Asian equities rose overnight; and European equity futures are suggesting a higher open this morning.

    Over in Australia, the Reserve Bank elected to hold rates at 4.35% but leaned towards the hawkish end of the spectrum, commenting on the need to return inflation to its target levels and suggesting that the job market remains tight. Despite this, markets are still pricing in a total of 1.25% worth of rate cuts by the end of 2025.

    Today's GBP rates

    Currency pair Daily move* Indicative rate**
    GBPAUD -0.42% 1.9490
    GBPCAD -0.30% 1.8022
    GBPCHF -0.04% 1.1321
    GBPDKK 0.48% 8.9440
    GBPEUR 0.48% 1.1993
    GBPJPY -0.20% 192.0610
    GBPNOK 0.05% 13.9796
    GBPNZD -0.30% 2.1292
    GBPSEK 0.36% 13.5975
    GBPUSD 0.20% 1.3356


    *Daily move - against
    G10 rates at 7:30am, 24.09.24

    ** Indicative rates - interbank rates at 7:30am, 24.09.24

    Key data points

    Currency Event Period Consensus Previous
    EUR IFO Business Climate Sept 86.00 86.60
    EUR IFO Current Assessment Sept 86.00 86.50
    EUR IFO Expectations Sept 86.40 86.80

    What we think

    China's stimulus measures have ignited a surge in risk appetite this morning, which is set to ripple through the FX markets and bolster GBP.

    Given the disappointing numbers that have come out of Europe this morning in the form of Germany's IFO numbers we wouldn't be surprised for GBP to stretch its gains further over EUR. The obvious question amongst clients now is “can GBP rise even further?"

    Fundamentally, it makes sense for GBP to be supported on the divergence of interest rate policies, but the question is: how much of this is priced in? We have the budget coming at the end of October and this could cause some headwinds for the currency. Relatively speaking, from a chart’s perspective, GBP is looking overvalued, which could signal an imminent pullback as markets take profits on GBP gains. But ultimately there would need to be some kind of catalyst for the shift to take place. For now, clients would do well to take advantage of the current levels and consider their options for hedging some of their future currency needs.

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