The British pound is on the verge of reaching "9" recently...

Source: Sina Finance

However, it is unsurprising that the UK economy is rebounding and the central bank will continue raising interest rates.

Since the beginning of this week, the pound has continued its upward trend in nearly three months, reaching a new high against the Chinese yuan in nearly two years, with the latest exchange rate reaching 1:9.06.

Why did pounds suddenly surge?

Federal Reserve stops raising interest rates

The recent impressive performance of the pound is largely influenced by the monetary policy differences between the Bank of England and the Federal Reserve in June.

According to relevant media reports, the pound has rebounded from its low point, and the Bank of England governor has countered rising expectations that the Bank of England will cut interest rates as early as the third quarter of 2024.

The Federal Reserve, as the central bank of the United States, decided to suspend the 11th consecutive increase in basic interest rates during its monetary policy meeting.

The UK economy is showing signs of improvement

According to British media Reuters, the salary increase in the first three months of this year in the UK has risen to 7.6%, which is higher than expected.

At the same time, the employment rate has also skyrocketed during this period, with an increase of 250 thousand jobs, while a poll from Reuters shows that the trend will continue in the future, with an increase of 162 thousand jobs.

Although everyone's wages and employment rates have increased, prices have also increased more year-on-year.

Euros "started strong but then declined"

Some people are happy while others are worried. Compared to the "soaring" pound exchange rate, the recent trend of the euro exchange rate has shown a "high opening low" trend, gradually showing a significant downward trend after a strong start with a 1:8 exchange rate on July 21.

Source: Sina Finance

We also analyzed this:

US Treasury yields rise

In the third quarter of 2023, the US dollar index rose strongly, and most major global currencies depreciated against the US dollar.

From June 30 to October 19, 2023, the US dollar index appreciated by 2.8%. Except for the slight appreciation of the Swiss franc and Hong Kong dollar against the US dollar, currencies such as the euro, pound sterling, Japanese yen, Chinese yuan, Canadian dollar, Australian dollar, and New Zealand dollar have all depreciated against the US dollar.

Source: Sina Finance

Escalation of the Israeli-Palestinian conflict

(Religious hatred between Palestine and Israel escalates into territorial issues)

On October 7, 2023, the Palestinian armed group Islamic Resistance Movement (Hamas) suddenly launched a surprise attack on Israel in the Gaza Strip. As of now, the conflict between Palestine and Israel has continued to worsen.

Undoubtedly, the conflict between Palestine and Israel will inevitably bring new variables to the foreign exchange market.

The tension in the Middle East increases geopolitical risks. Global investors' risk aversion sentiment is rising.

Economic downturn in the Eurozone

Compared to the United States, the economic growth in the eurozone is weaker, interest rates are lowered earlier, and the Italian-German interest rate difference is relaxed, indicating that the euro is expected to be relatively weak compared to the US dollar as a whole. The eurozone is in a deep recession; Strong inflation stickiness and slow decline rate

The euro exchange rate fluctuates under the influence of market sentiment. When there are positive expectations in the market, the exchange rate begins to rise, but when market sentiment fluctuates or changes, the exchange rate falls back.

The European Central Bank's loose monetary policy

From the data released at the latest meeting of the Federal Open Market Committee - the October non-farm employment data was weaker than expected - the possibility of interest rate correction in December has greatly decreased; Therefore, most economists do not expect the Federal Reserve to raise interest rates again.

In the current economic environment, the European Central Bank may face pressure to raise interest rates in order to curb inflation, but it will also suppress economic growth, thereby affecting the performance of the euro.

Will the euro continue to depreciate?

If based on the current exchange rate between the euro and the Chinese yuan, it seems that the euro is in a period of depreciation

The downward trend in the exchange rate between the euro and the US dollar that began in July this year makes people cannot help but think that the euro seems to be depreciating.

The Economic Communiqu é of the European Central Bank also shows that economic activity in the eurozone is expected to significantly slow down in the coming quarters.

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