By Matthew Boyle
It seems market sentiment may have shifted recently, away from Pound which many felt was overbacked and overbought. In the last 3 weeks we have seen GBP>EUR rates plummet from 6-year highs, last Thursday slipping to a new 2022 low having shed around 4 cents.
With markets heavily driven by central bank intervention this drop was largely a result of the scales tipping away from GBP with its ongoing programme of interest rate hikes and towards the EUR where rates have not been raised for over 10 years.
Rising inflation in Europe had led to increasing speculation the ECB may have to raise rates, whilst the BoE MPC vote looking to slow down the programme if hikes has seen the Pound come off full throttle.
From touching 2022 lows last Thursday GBP>EUR did bounce back slightly on Friday’s session following the Kremlin’s purported threat to cut off European gas supplies unless “unfriendly countries” pay them in Roubles.
This threat was enough to allow GBP to claw back around a cent of its losses against a EUR that would be heavily affected should supply be cut-off.
Those with EUR requirements may want to take advantage of this opportunity as should this Russian threat of cutting supply recede, we would expect the single currency to recommence its march on the Pound.
With Easter fast approaching it is also worth noting that the Bank of England don’t meet this month, so we will not have potential news of interest rate hikes to bolster the Pound, critically though EUR inflation will still be released.
If EUR inflation rises again to a 4th consecutive record high this will only open the door of speculation further that the ECB must intervene, and with no defence offered from a silent BoE the slide could again be a big one.
If you would like some guidance on how you can remove risk or if you would like to take advantage of this current spike in rates speak to A Place in the Sun Currency today for some friendly and professional guidance.
Data this week
Monday
N/A EUR Eurogroup Meeting
11.30 EUR Sentix Investor Confidence
12.05 GBP BoE’s Governor Bailey Speech
Tuesday
07.30 AUD RBA interest rate decision
10.00 EUR EcoFIn Meeting
11.00 EUR S & P data
17.00 USD ISM Services PMI
Wednesday
09.00 EUR German factory orders
11.00 EUR ECB’s De Guindos Speech
12.00 EUR PPI data & ECB’s Pannetta Speech
21.00 USD FOMC Minutes
Thursday
04.30 AUD Export, Imports & Trade balance data
12.00 EUR Retail Sales & ECB monetary policy meeting accounts.
13.00 USD Jobless claims
23.05 USD FED’ Williams speech
Friday
15.30 CAD Unemployment rate & Wage data