Market Update 4th April – 8th April

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

GBP

We have seen continued GBP weakness this week as the global uncertainty remains increasingly high due to the situation the Ukraine. Since Brexit the Pound has been assessed as a riskier asset than the Dollar or Euro for example which has led to the general weakening of the pound most significantly against the USD which is at the lowest level we have seen since the beginning of the Pandemic. We also saw a four-month low against the Euro last week. We have seen slight recovery due to peace talks that are taking place at the minute yet there has been no real sign of the partial military pullback in Northern Ukraine. The Bank of England Governor warned last week of the biggest energy shock in 50 years, while his deputy said that the UK would see an unprecedented hit to national income which could also affect the Pound. This week we will be monitoring further comments around monetary policy in the UK as well as any developments with rising Covid Infections in the UK which could affect travel as well as worker output.

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

We have seen continued USD strength throughout the past week as a strong US jobs report strengthened the case for more aggressive Federal Reserve rate hikes to tame decades high inflation. The US economy added 431,000 jobs in March, which despite falling short of expectations still had a positive outlook as the unemployment figures fell to a new two year low. As well as this the Dollar also gained more strength against the Euro as Russain’s war with Ukraine wages on. The USD has strengthen to the strongest point in two years against the Euro.  German chancellor Scholz said on Sunday that western nations will impose additional sanctions on Russia in the coming days after Ukraine accused Russian forces of war crimes. Whilst there is this ongoing conflict it is likely that we will see increased volatility especially surround the USD which has increased demand during times of global uncertainty. Over the next week we will also see jobless figures for the US which will asses how accurate last week figures were and could affect the strength of the US Dollar.