Pound Sterling (GBP)

Sterling recovered from recent lows after the Bank of England held interest rates steady and hinted at a potential cut in the future. However, this came as little surprise to the markets, which had largely priced in such an outcome. While weaker economic data continues to weigh on the Pound, a reduction in geopolitical tensions has helped steady market sentiment. In the short term, the Bank’s cautious tone may offer some support to the currency, although the prospect of further rate cuts could bring renewed pressure in the coming months.

Euro (EUR)

The Euro has found support amid heightened global risk aversion, benefitting from its perception as a relatively stable currency during periods of geopolitical uncertainty. Market sentiment remains wary, prompting investors to favour safer assets. Additionally, economic trends in surrounding regions have reinforced expectations of diverging monetary policies, lending further support to the Euro. Although a slight easing in tensions in the Middle East has offered some market relief, the Euro continues to draw strength from its role in defensive positioning.

U.S. Dollar (USD)

The US Dollar weakened slightly overnight after strengthening yesterday although it remains underpinned by the Federal Reserve’s continued hawkish messaging. While interest rates were left unchanged, the Fed indicated fewer cuts ahead, maintaining underlying Dollar strength. At the same time, global central banks are gradually reducing their exposure to US assets, citing increased fiscal risks and policy uncertainty. This shift, often referred to as “de-dollarisation”, signals a broader trend towards diversification in global reserve currencies.