December 25, 2024 – Written by David Woodsmith
STORY LINK BREAKING: Pound to Euro Rate in Mysterious 2% JUMP on Christmas Day
The British Pound to Euro exchange rate has seen a mysterious 2% jump higher on Christmas Day.
The Pound went from trading at around 1.2055 at 07:30, to 1.2276 at 08:30 GMT. This represents an over 200 pip jump on otherwise thin trading conditions.
More updates to follow…
Pound Nudges Higher into the Holiday Period, Investment Banks Still Expect Dollar Strength
The Pound secured a net gain on Tuesday with very light trading ahead of the market holidays over the next few days.
The Pound to Dollar (GBP/USD) exchange rate strengthened to 1.2570 from lows at 1.2525 early in the session.
Scotiabank chief FX strategist Shaun Osborne is sceptical that the Pound will make sustained headway; “Cable is holding a tight range intraday but the recent downtrend persists and Friday’s push higher was not enough to alter bearish, near-term trend dynamics.”
He added; “Key GBP support ius 1.2490 into January; below here targets a drop to 1.23. Resistance is 1.2610/20.”
The Pound to Euro (GBP/EUR) exchange rate also secured a limited advance to 1.2080.
Position adjustment remained a key feature with evidence that short Pound positions were being closed into the holiday period.
The dollar also tends to lose ground in the second half of December which also helped underpin the Pound.
Many investment banks, however, expect the dollar to secure fresh headway at the start of 2025, especially after the hawkish Federal Reserve policy statement last week.
Jonas Goltermann, deputy chief markets economist at Capital Economics commented; “Our base case is that the dollar will make some further headway next year as the U.S. continues to outperform, the interest rate gap between the U.S. and other G10 economies widens a little further, and the Trump administration brings in higher U.S. tariffs.”
According to City Index market strategist Fiona Cincotta; “Sterling has been supported across 2024 by the BoE cutting rates at a slower pace than the Federal Reserve and by the expectation that this trend would continue in 2025.”
She added; “However, Donald Trump’s victory in the U.S. election, combined with the Labour government’s budget, means that the outlook for both economies has changed, potentially impacting the direction of monetary policy in 2025 for both central banks and sterling.”
According to Nordea; “There is also the potential for an even stronger dollar in the scenario of an aggressive trade war between the US and the rest of the world.”
Scotiabank noted the importance of Treasury markets; “US yields remain supportive and there appears little potential for any of the major currencies to rally at this point.”
The US 10-year yield was close to 4.60% on Tuesday and the bank added; “All else equal, the USD should start the new year in positive fashion, as it is wont to do. DXY seasonal trends are strongly bullish in Q1 of the calendar year – just when investors will be focusing on the incoming US administration and what its policy priorities are likely to be.”
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TAGS: Pound Euro Forecasts
