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The GBP/EUR rate dropped to the lowest rate we have seen since the start of the month, this could be due to the ECB mentioning an interest rate hike this month. The GBP/USD rate also dropped to lows we haven’t seen since the start of the month too. We have seen a lot of sterling weakness as Boris Johnson has resigned and now the conservative party are now looking for a new leader. Anytime there is any uncertainty within a government it will usually cause a currency to weaken. this Tuesday we have unemployment figures coming out – if the figures come out higher than expected this will indicate that the number of unemployed people in the UK has increased which could potentially weaken the pound. However, if the figures come out lower than expected then this could potentially strengthen the pound.
The EUR/USD hit parity for the last time in 20 years last week. This Thursday we have an interest rate decision from the ECB, they have mentioned that an interest rate hike is looking likely. Hiking the interest rates could stop the Euro from dropping off further and reduce further inflation but it could make the economy struggle. If interest rates are raised then this discourages borrowing and encourages saving which tends to slow the economy down and decrease inflation.
We’ve seen weakness against the dollar at the start of this week due to CPI data coming out on Wednesday for the Pound. However still continued strength overall for the dollar after Boris Johnson`s resignation as well as 52 other MP`s failing to remain in cabinet. Meaning overall weakness for the pound. Further to this, the continued war in Ukraine has seen more volatility to the dollar after Russia have intensified attacks on the capital Kiev and other surrounding areas. With there still being no end to the war in-sight this is causing the dollar as well as other major currencies to be very unsteady and have an unclear direction as to where it is heading. On Thursday we have unemployment figures coming out, if the figures are lower than expected then this could potentially strengthen the dollar yet if the figures come out higher than expected this will show a growth in unemployment and could weaken the dollar.
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