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Although it has drifted a little since Wednesday’s fresh 16-month high against the euro, the pound remains within striking distance. It has also gained a quarter of a cent on the US dollar, after a day when the price of oil reached its highest level in weeks, sending another wave of nerves through financial markets.
The latest disruption is due to the ongoing attacks on shipping in the Strait of Hormuz, combined with tropical storms in the Gulf of Mexico threatening American oil production.
No surprise that oil is the cover story on our brand-new Quarterly Forecast, released yesterday. See what the brightest business brains predict for the pound, euro and US dollar.
The knock-on effects were felt across Europe and America yesterday. Government borrowing costs climbed to levels not seen in decades before easing later in the day. Stock markets also struggled, with Wall Street and the FTSE slipping further.
Investors have been reconsidering the outlook for American interest rates, but there was little relief for the euro, now close to its worst against the US dollar since spring 2025.
So, it’s been a good week for anyone exchanging pounds into euros, and just as well in a week where there was little else on the plus side. House prices were seen to be static and share prices fell. For sterling, the events of the past few days show that favourable conditions can quickly become less predictable.
GBP: Pound holds its ground as Budget nerves grow
Sterling recovered some ground against the US dollar yesterday, helped by a broader retreat in the American currency. Against the euro, however, the pound was little changed and remains close to its strongest levels in more than a year. British borrowing costs have been climbing sharply, adding to the pressure ahead of the Budget on 28 October. For the pound, the next big event will be GDP o Thursday.GBP/USD: the past year
EUR: Euro finds some relief after a bruising week
Although the charts all show a sea of red for the euro over the past week, the losses have been relatively small – no more than 1% against leading currencies. The markets remain concerned about France's finances, but an easing in government borrowing costs helped take some of the pressure off the single currency. Next week is a lot quieter for eurozone data, but gilt yields and oil prices remain the threat.GBP/EUR: the past year
USD: Dollar loses momentum as markets change their minds
Not a great day for the US dollar either yesterday, in retreat against both sterling and the euro and reversing some of its earlier gains. Investors had initially favoured the American currency as oil prices and government borrowing costs climbed, but that enthusiasm faded as the day progressed. Federal Reserve policymaker Christopher Waller suggested that further interest rate increases may be needed to tackle inflation. Today's US consumer confidence figures will offer another glimpse of how households are coping with rising prices, before next week's inflation figures provide a more substantial test.USD/GBP: the past year
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