As the dollar’s strength persists in the New York market, the pound could fall against the euro. The divergence in the policy direction of the Bank of England and the ECB is a key factor, while attention is also focused on the outlook for interest rates and fiscal risks.
In today’s intraday foreign-exchange trading, the dollar’s strength remains firm, while the pound has fallen against the dollar to the low 1.33 range. GBP/USD is around 1.3323, and GBP/JPY has declined to the low 209 range. The market is seeing moves below the 1.3335 support level, with traders continuing to look for a downside target.
The possibility of a decline in the pound against the euro is attributed to differences in the direction of monetary policy between the Bank of England and the European Central Bank. Analysts expect the Bank of England to hold its current interest rates through next summer before shifting to rate cuts, while the ECB is expected to deliver additional rate hikes in October and December.
The UK economy is still considered vulnerable, and some have pointed out that the Bank of England’s interest-rate outlook has greater scope for downward revisions than the ECB’s. There is also a view that the UK budget expected in October could weigh on the pound as a fiscal risk.
Against this backdrop, market levels of 1.3323 for GBP/USD, 209.96 for GBP/JPY and 0.8582 for EUR/GBP have been indicated, and upcoming policy announcements and fiscal developments could determine short-term market volatility.