Triple-Curve Analysis: Sterling’s Performance against the Dollar and Euro

Recent market dynamics have seen the British pound navigating choppy waters against both the US dollar and the euro. Over the past month, GBP/USD has oscillated between 1.31 and 1.34, while GBP/EUR climbed from below €1.15 to a one-month high of €1.1876. This in-depth analysis examines the common and divergent drivers behind these moves, technical signals across both pairs, and implications for investors and businesses.

1. Macroeconomic Drivers: Commonalities and Contrasts

Driver	Impact on GBP/USD	Impact on GBP/EUR
Interest-Rate Differentials	US Treasuries’ rising yields have bolstered the dollar, with Fed tightening expectations supporting USD strength.	The eurozone’s lower bond yields and slower ECB tightening have weakened the euro, enhancing sterling’s relative appeal.
Labour-Market Data	Strong US employment figures in early May led to a brief dollar rally, pulling GBP/USD down to 1.3174.	UK wage growth and low unemployment bolstered sterling versus the euro, as eurozone labour markets remain under pressure from energy costs.
Monetary-Policy Signals	Fed members’ hawkish comments underpinned the dollar; the BoE’s dovish hints capped sterling gains.	A more hawkish BoE stance compared to the ECB drove GBP/EUR above €1.17, culminating in the monthly peak.
Geopolitical and Energy Factors	Safe-haven demand for USD amid global tensions supported the dollar.	Euro suffered from the eurozone’s gas-price volatility; sterling benefited from the UK’s partial hedging of energy imports.

2. Divergent Sentiment and Correlation Dynamics

Pound versus Dollar: Between Growth Impulses and a Sudden Slide — A Deep Dive

Over the past month, the GBP/USD rate has fluctuated within a narrow band between 1.31 and 1.34, reflecting a host of conflicting influences: from monetary policy expectations in the US and UK to geopolitical tremors. Today, despite powerful bullish surges mid-period, sterling abruptly slipped to 1.3174. Let us examine what lies behind these movements and what lessons investors and businesses might learn.

1. Rate Movements: Key Milestones

• Consolidation Phase (12–16 April): Sterling traded around 1.31–1.32 as markets awaited US inflation data and the Federal Reserve’s decision.
• First Bullish Impulse (17–20 April): A series of bullish sessions drove the rate to 1.33 after robust UK retail sales and softer-than-expected US inflation figures.
• Second, Sharper Rise (21–25 April): Sterling peaked near 1.342 following confident remarks from the Bank of England indicating further tightening of monetary policy.
• Moderate Pull-back and Range-Trading (26 April–8 May): Profits were taken on the rally as US Treasury yields rose; the rate stabilised between 1.33 and 1.335.
• Steep Decline (9–12 May): Ahead of the Fed meeting and on the back of strong US employment data, sterling fell to 1.3174, with the dollar supported by robust macro data and the prospect of further rate increases.

2. Principal Drivers and Risks

2.1 Interest-Rate Differentials

• Treasuries vs Gilts: Rising yields on US 10-year Treasuries have bolstered the dollar’s appeal; UK Gilts look less attractive in comparison.
• Fed versus BoE Expectations: While the Fed hints at another rate rise this year, debate in the UK increasingly centres on pausing tightening, narrowing the yield gap in sterling’s favour.

2.2 Macroeconomic Data

• Strong US Employment Figures: Growth in non-farm payrolls and a drop in unemployment have underpinned the dollar.
• UK PMIs and Retail Sales: Modest service-sector expansion alongside stagnating manufacturing output has left the outlook for the UK economy uncertain.

2.3 Geopolitics and Global Sentiment

• Eurozone Risks: Energy shortages and geopolitical tensions have kept demand for the dollar as a safe-haven asset elevated.
• Risk-On vs Risk-Off: Periods of risk appetite (April) buoyed sterling, whereas recent jitters ahead of the Fed meeting have returned demand to the dollar.

3. Technical Outlook

• Support Zone 1.3150–1.3200: Previously tested in January–March and held the price today.
• Resistance Zone 1.3350–1.3400: Repeatedly capped rallies at the end of April.
• 50- and 200-Day Moving Averages: A potential ‘death cross’ suggests a continuation of the downward trend if the rate remains below 1.3200.

4. Impact on Business and Investment

Pound Hits One‑Month High: What’s Driving Sterling’s Rise Against the Euro (12 April - 12 May 2025)

Over the past four weeks, the GBP/EUR rate has followed a clear upward trajectory and today reached €1.1876, marking its highest level in a month. Analysts attribute sterling’s strength to a blend of monetary expectations in the UK and economic headwinds in the eurozone.

Rate Dynamics and Key Milestones

Between 12 April and 12 May, GBP/EUR climbed from just under €1.15 to €1.1876. The main phases were:

• Opening Phase (12–15 April): the rate held around €1.14–1.15, then briefly spiked above €1.17 amid volatile trading.
• Consolidation (16–22 April): minor swings around €1.16–1.17 as markets awaited inflation data from both the UK and the eurozone.
• Growth Impulse (23 April–5 May): following softer-than‑expected eurozone inflation figures and hawkish comments from the Bank of England, sterling surged past €1.17.
• Final Push (6–12 May): a series of positive UK economic surprises, coupled with euro weakness, propelled the rate to its monthly peak.

Key Drivers of Sterling’s StrengthUK Economic Data

1. Recent jobs reports showed a drop in unemployment and rising average wages, reinforcing expectations of further Bank of England rate rises. 
2. Monetary Policy Expectations
   With eurozone inflation cooling, investors have favoured sterling, pricing in a stronger probability of UK rate hikes, while the European Central Bank remains cautious amid uneven growth. 
3. Geopolitical and Energy Pressures
   High energy costs continue to burden eurozone economies, whereas the UK has hedged some of those risks, leaving sterling comparatively robust. 
4. Trade Balance Effects
   A decline in energy imports and growth in services exports (particularly in tourism and financial services) have supported sterling, in contrast to the euro’s weaker external accounts.

Benefits and Risks for Business

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