Tue, June 18, 2024

The Pound is under pressure against the euro

The pound collapsed on Monday. What caused its decline?

Despite a lack of news to justify the moves, the British Pound is under significant selling pressure in midweek trade.

The UK public sector borrowing data came in worse than expected, but the charts show almost no impact on the Pound after their release.

By December 21, the Pound was down three-quarters of a percent against the dollar by midday.

Losses were against all G10 peers. This suggested a clearly GBP-centric mood despite the lack of discernible UK data or news to explain the moves.

Oddly, the losses come despite global stock markets looking upbeat, implying that investor sentiment is relatively buoyant.

The Pound continues to be especially sensitive to global investor sentiment, and thus the broader context is, if anything, supportive.

Bond markets show that yields are rising, but this is true for all other major economies.

Indeed, the UK news has been undeniably positive, with gas prices falling to their lowest levels since June, implying the reversal of an impressive summer spike.

When writing, the Pound to euro exchange rate had fallen to 1.1399, its lowest in a month, bringing euro payment rates at high-street banks to around 1.1175. Competitive holiday money and cash providers have been seen quoting around 1.12833, and competitive money transfer providers have been seen quoting around 1.1369.

The Pound Dollar exchange rate is currently at 1.2100, banks are offering around 1.1861, good vacation and cash providers are at 1.1979, and good payment providers are at 1.2067.

Due to a lack of clear drivers, the Pound’s swings may continue, with the possibility of a reversion higher in the coming days.

If forced to make a directional call, it appears that the downside is currently easier to achieve than the upside.

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