Hint at FED hike sees rates surge.

30 October, 2015

Matthew Boyle

It has been a busy week so far with big movements seen across the board particularly in the major currency pairings involving GBP, EUR and USD. Following the big news of last week that the ECB will be reviewing their Q.E programme in December the Euro began to lose significant ground, consequently starting a change in trend where it was losing rather than gaining. This saw buying rates for the Euro improve quickly as we saw for example GBP>EUR gain almost 6 cents in just a few days. This movement was halted slightly however on Tuesday as UK GDP figures failed to reach expectation and for a short period it looked like the Euro may mount a recover, but this was not so.

It was yesterday’s FED announcement that prevented it and caused the single currency to slide further, as it was hinted that a US interest rate hike may now happen as early as December of this year. As a result we saw USD strengthen quickly gaining around a cent against GBP and almost 2 against EUR. It was this swing in cable, that as we have seen before with the see-saw effect also helped GBP>EUR rates allowing the pound to steal almost 1.5 cent as global investors eye up the appeal of an improved interest rate and move funds out of the Eurozone and across the Atlantic.

Today we have no data releases from the UK, with the morning dominated with Eurozone inflation and unemployment data, and the afternoon by the US who release income and expenditure Ecostats. With no news form the UK it is likely that again the movements in USD>EUR will largely effect GBP>EUR rates today. Whilst it may seem that trends have now reversed for the majors, with such significant movements in a short period we often see a correction in rates. So don’t assume that rates will continue to move this way, and if you have any short-term requirements and are holding out don’t be caught out by any potential dips in the rates.