Pound Euro Exchange Rate Rises as USD Continues to Climb

November 11, 2024 - Written by Frank Davies

STORY LINK Pound Euro Exchange Rate Rises as USD Continues to Climb

The Pound Euro (GBP/EUR) exchange rate climbed on Monday, as the US election results continued to boost the US Dollar (USD) and thereby pressure the Euro (EUR).

At the time of writing, GBP/EUR traded at €1.2074, up around 0.2% on the day.

The Euro faced challenges on Monday due to its strong negative correlation with the US Dollar, which put it under pressure.

After Donald Trump's victory in the US presidential election last week, USD experienced a surge. This upward trend continued into Monday as the Republican Party appeared poised to retain control of the House, having already secured the Senate.

If the Republicans maintain control of both chambers, they will have an easier path to enacting Trump's proposed tax cuts and energy deregulation measures. These policies could provide a short-term boost to the US economy and increase inflation, potentially leading the Federal Reserve to keep interest rates higher for a longer period.

As the US Dollar continued to rise, the Euro, which typically moves in the opposite direction, found itself on the defensive.

Meanwhile, the Pound (GBP) had a mixed performance on Monday, with a lack of data leaving the increasingly risk-sensitive UK currency muted despite the positive market sentiment.

Donald Trump's election victory has also piled pressure on Sterling due to concerns that proposed tariffs could negatively impact the already vulnerable UK economy.

These fears kept the Pound on the back foot on Monday, although it managed to gain some ground against the weakening Euro.

Looking forward, the UK's upcoming labour market report could significantly impact the Pound on Tuesday.

Market expectations suggest that British wage growth may have slowed further in the three months leading up to September, with unemployment also expected to have risen slightly during the same period.

If the data aligns with these forecasts, indications of a weakening labour market could intensify speculation about a Bank of England (BoE) interest rate cut in December, putting pressure on the Pound.

Simultaneously, the Euro may encounter its own challenges on Tuesday with the release of Germany's latest ZEW economic sentiment index. Economic morale in the Eurozone's largest economy is expected to have worsened this month, which could negatively affect EUR exchange rates.

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TAGS: Pound Euro Forecasts