Daily FX Report – Pound Sterling Weakens

GBP: Yesterday, the British Pound experienced a sharp decline, losing over 1% against both the U.S. Dollar and the Euro. This marks one of its steepest daily falls against the Dollar and its largest drop against the Euro. Analysts attribute the decline to several factors, including the Bank of England’s dovish monetary policy outlook, the currency’s overvaluation, and extended speculative positions.

 

EUR: Similarly, the Euro saw some weakness due to growing expectations of an interest rate cut by the European Central Bank in October, which would be the ECB’s third reduction this year. Earlier this week, Eurozone inflation dropped to 1.8% year-on-year in September, falling below the ECB’s 2% target and marking its lowest level since April 2021. As a result, markets now reflect a 95% probability of a 25-basis point rate cut this month.

 

USD: Meanwhile, the U.S. Dollar strengthened further yesterday, buoyed by strong employment data and uncertainty caused by the Middle East turmoil. Today’s focus will be on the U.S. non-farm payrolls report in the afternoon. Economists polled by Reuters expect 140,000 jobs to be added, with unemployment likely to remain steady at 4.2%.