By Naomi Rovnick and Dhara Ranasinghe

LONDON(Reuters) -There is not any respite for struggling European currencies as a probable pause in Central Financial Institution interest-rate rises and a weakening financial outlook places the give attention to potential price cuts forward.

Sterling slid to a greater than six-month low towards the greenback on Thursday, even after the Financial Institution of England held charges at a 15-year excessive and pledged to boost borrowing prices once more if it can’t tame inflation.

The Swiss franc, one among this 12 months’s finest performing main currencies versus the greenback, fell nearly 1% at one level after Switzerland shocked markets by pausing its price rise cycle.

In the meantime, Thursday’s quarter-point price rise in Sweden failed to offer a lot respite for the battered Scandinavian forex, which is down over 6% towards the buck to date this 12 months.

In brief, the outlook for currencies in Europe is bearish, analysts and traders say, citing a strengthening greenback and stagnant financial development in European nations as oil costs rise.

“We’re turning to an even bigger give attention to development than what central banks do,” mentioned Package Juckes, world head of forex technique at Societe Generale.

SOUNDING HAWKISH

The BoE provided combined messages by pledging to remain powerful on inflation, nonetheless greater than triple its 2% goal, whereas noting that financial development was slowing.

The European Central Financial institution final week lifted charges to a report 4% and upgraded its inflation forecast for 2024, however the euro fell and has misplaced nearly 2% towards the greenback this month.

SocGen’s Juckes mentioned the euro was “headed for a take a look at parity,” in a reference to the $1 marker.

The ECB, just like the U.S. Federal Reserve, has pushed the thought of charges staying increased for longer. This backdrop ought to assist a forex however within the euro’s case, merchants are homing in on the area’s financial underperformance and betting the ECB will probably be pressured to chop earlier than the Fed.

General, Europe’s central banks “want to painting this concept of upper for longer (charges),” mentioned Ed Hutchings, head of charges at Aviva Buyers. However markets, he mentioned, have been “getting forward of this.”

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Sweden’s Riksbank raised its key price by 25 bps to 4% and mentioned it could must do extra to carry inflation decrease. The forex, which the central financial institution labeled “unjustifiably weak,” barely caught a break and stays close to a report low towards the euro.

Sweden’s financial system, harm by turmoil in the actual property market, is predicted to contract this 12 months.

In truth, the one central financial institution whose hawkish tones have struck a chord with markets is the Fed, which on Wednesday held charges regular however signaled yet another price rise this 12 months.

The greenback index which measures the U.S. forex towards friends, is close to its highest in over six months.

This, mentioned Manulife Funding Administration chief funding officer Nathan Thooft, is as a result of “the information suggests the U.S. financial system proper now’s significantly better than a lot of Western Europe.”

He anticipated one the of huge European central banks to be the primary to chop charges.

Economists polled by Reuters anticipate the euro zone financial system to develop 0.6% this 12 months, the UK to develop 0.4% and america by 2%.

“As we change into extra information dependent, currencies swing round with each bit of information that is obtainable,” mentioned Bjoern Jesch, world chief funding officer at DWS Group.

The push and pull in market expectations forward of price choices, as has been the case in Britain and the euro space this month, highlights rising volatility round central financial institution conferences.

Nomura expects sterling to weaken to $1.22 by end-October, from $1.23 now; ING economists mentioned the Swedish crown remained “susceptible.”

VOLATILITY

One other driver of greenback energy is oil costs, buying and selling close to 10-month highs above $90 a barrel.

“The U.S. is an oil producer so it tends to get harm little or no by increased oil costs whereas Europe and Japan get hit extra,” mentioned Barclays world head of FX technique Themos Fiotakis.

European central banks have been “in a bind,” Fiotakis added, as increased oil costs additionally threatened to push inflation increased.

This made price cuts bets in Europe appear susceptible, mentioned Orla Garvey, senior mounted revenue portfolio supervisor at Federated Hermes.

“Progress and inflation information will probably be extra unstable going ahead and this in itself will create increased market volatility,” she mentioned.

(Reporting by Naomi Rovnick and Dhara Ranasinghe; enhancing by Christina Fincher)