This month’s currency outlook. Credit: Currencies Direct
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Euro
EUR/GBP: Up from £0.86 to £0.87
EUR/USD: Up from $1.16 to $1.18
The euro trended broadly higher over the past month. However, its appreciation proved uneven in large part due to the ousting of another French Prime Minister and growing concerns over France’s debt crisis.
Supporting the single currency’s ascent was the euro’s negative correlation with the US dollar, coupled with the European Central Bank’s (ECB) decision to keep interest rates on hold again this month.
Eurozone economic indicators are likely to be closely watched in the coming month, with the euro likely to maintain a positive trajectory if the data support the suggestion that the ECB’s cutting cycle is complete.
Pound
GBP/EUR: Down from €1.15 to €1.14
GBP/USD: Unchanged at $1.35
The pound plunged at the start of September as a surge in long-dated UK bond yields spooked GBP investors.
Fortunately for GBP investors, the bond crisis proved short-lived, with Sterling drawing support from robust UK inflation figures and the Bank of England (BoE), which opted to leave interest rates on hold again this month.
Looking ahead, speculation over the contents of Chancellor Rachel Reeves’s autumn budget may increasingly shape Sterling sentiment in the coming weeks, with tax hike expectations likely to exert pressure on GBP exchange rates.
US Dollar
USD/GBP: Unchanged at £0.74
USD/EUR: Down from €0.85 to €0.84
The US dollar faced significant selling pressure in recent weeks as abysmal US payroll figures turbocharged Federal Reserve interest rate cut expectations.
Bets that the Fed will deliver 75bps of easing by the end of 2025 eventually saw USD slump to new multi-month lows, just before the Fed’s first cut of the year.
Fed rate speculation will continue to act as a key catalyst for the US dollar in the coming month, with September’s payroll figures likely to be a significant risk event for the USD.
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