EUR strength continues

By Lauren Buckner

The Euro continues to hold its strength versus both the Pound and the US Dollar as markets open this morning, begging the question of whether we should now accept these levels as the new norm.

Following last weeks European Central Bank meeting (ECB), the Euro has moved to three month highs against the USD and pushed Sterling off of the one way trajectory that we had seen since mid 2020 of steady gains in the Pound’s value.

Dubbed ‘Super Thursday’ by some, we saw market volatility reminiscent of pre-financial crash days last week, as the Pound rose to a level against the Euro not seen since prior to the Brexit referendum way back in 2016, as the Bank of England announced their interest rate hike. However, within the hour we had dropped almost three cents lower as ECB President Christine Lagarde left the door wide open for interest rate hikes in the EU in the short term – something that had until this point been completely ruled out. With very little market data out this week to challenge these levels the EUR has maintained these gains. Despite the disappointment this brings to many, it’s worth remembering that it took us almost two years to get back to these levels in GBP/EUR and they represent a good buying opportunity for your transfers.

UK GDP this morning confirmed that Omicron had impacted our economic performance through December, recording flat growth in the economy at 1%. This puts UK GDP for 2021 at record highs of 7.5% as the UK continues to emerge from the pandemic in a strong position.

Simmering away in the background in the UK is continued criticism of Boris Johnson from within the Conservative Party. For now it would seem that the letter writing is on hold for those MPs wishing to topple him from the Top Job as the 54 letters of no-confidence needed to force the PM out of No.10 have failed to be realised, so far. This however, still remains a risk to GBP as a country without leadership, even temporarily, sees investor confidence begin to stale and the currency often fall in value.

Headlines this week continue to focus on rising tensions between Russia and the Ukraine which continue to cause great concern to the global community. As Russia is reported to have assembled over 70% of the required man power for a full-scale invasion on Ukrainian borders we have seen a scrambled attempt from the West to cool tensions.

Threatening global sanctions if an attack takes place it’s difficult to imagine how this will deter Russia as they continue to hike gas prices and threaten supply to the UK and EU, one root cause of spiralling inflation in both. At present, risk appetite in the market is still strong preventing a rush to drop riskier assets and currencies in favour of the USD, but if this changes we could once again see choppy fluctuations in the market.

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