Know how GBP vs EUR hits a 9-week high

It has been a very unexpectedly positive month for the Pound..

In terms of the £-$ rate, history seems to have repeated itself in November. Last year, cable climbed 4% and the exact same margin has been achieved this time round in the month. Whilst there is no evidence of a trend pre-2022, the last 2-years has seen the jump come out of the blue.

With GBP v USD now firmly above 2023's average and more importantly, way above the overwhelming majority of data houses' forecasts, now is the time to bank profit if you haven't already done so. A far better scenario than the damage limitation we were expecting to be faced with about now.

Let's take a look at what has happened the last few days, which has seen Sterling improve its already favourable position..

"Cool heads will prevail" is what most of the traders we follow are saying in terms of not changing positions on the £-$. Overbought territory does look very likely at this stage, but there does seem to be wind in the sails for the pair, especially with US GDP coming in stronger than expected and inflation undershooting forecast.

Both releases confirm the US soft landing and paint a rather strong economic picture whilst interest rates remain high. And interest rates are the talk of the town, the main market driver and with the US performing well, the Fed may decide sooner rather than later to lower interest rates to keep the labour market strong.

In the Euro-Zone, Germany have dominated the last few days with data releases. Unemployment ticked up slightly, but more importantly, retail sales jumped and inflation fell further than anticipated. So it did in the Euro-Zone with both the headline and core numbers, which was a market surprise which saw the Euro weaken, due to money markets bringing forward expectations of an ECB rate cut

By Dan Waterman on November 30, 2023