Market Update 11th April – 15th April

Where you will be able to keep up to date with all the latest changes in the currency market

GBP

Last week we saw the Pound benefit against the Euro due to the revelation of Russian war crimes that had taken place in Ukraine. These reports of atrocities fuelled market anxiety of further European sanctions against Russia, which saw the EUR weaken against both Pound and Dollar. Looking forward, the outcome of the French presidential election is likely to dominate movements in EUR markets, potentially offering the Europe’s single currency a partial offset. This is due to the fact that exit polls following a first round vote appeared to give Marcon a healthy lead against far-right extremist Le Pen. Additionally, expectations of a hawkish stance from the European Central Bank suggest the outcome of Thursday’s ECB monetary policy meeting could see the Euro strengthen in the near future.

EUR

Since the start of the war in Ukraine, just over a month ago, the Euro has struggled against both Sterling and US Dollar. Rumours of peace talks temporarily strengthened the Euro towards the back end of last week, however, this strength did not last long after Putin’s statement on Friday demanded that oil and gas is to be bought from Russia solely using the Rubble. European buyers are to set up accounts with Russian banks or have their supply shut down. Any threat to energy supply to Europe will cause some level of panic in the region and likely devalue the Euro. Germany saw soaring inflation last week with prices jumping to 7.3%, well above the 6.3% expected. This could impact Christian Lagarde’s stance that the ECB is unlikely to raise interest rates, and thus it will be interesting to see what information surfaces after the ECB’s monetary policy meeting on Thursday afternoon. An indication from the ECB that interest rates could increase would likely strengthen the Euro. Otherwise, all eyes are on the Ukrainian War, which continues to dominate fluctuations in EUR markets. This week we also have Retail Sales out which could cause some volatility on Thursday.

USD

Since the start of April we have continued to see the Dollar strengthen against the Pound and Euro, primarily due to the suggestions that the Federal Reserve are considering a rate hike sooner rather than later to combat decade high inflation. Additionally, the USD has seen continued strength due to its status as a safe-haven currency amid times of crisis, and unfortunately the War in Ukraine continues with no clear sign of a ceasefire. There are no clear signs that this strengthening trend is likely to change, with some analysts suggesting that the EUR/USD could reach its lowest level since the pandemic. US Consumer Price Index data on Tuesday could prompt a response from Federal Reserve officials that suggest interest rates could rise faster than market expectations of 2% by 2023, which could strengthen the dollar further.