GBP/USD
The Dollar boom continues yet another day as the Pound tries desperately to stay put and not exceed the lows we reached yesterday. As it currently stands, the rate is teetering in and out of a decline showing the conflict between the Pound and Dollar’s strength. With the rate now sitting on par with the lowest levels we have seen in the market since July 2020, it is still showing potential to fall even further. This comes as the Dollar continues to harness strength from an array of different events. The most prominent being the outlook for the US economy bolstering the Buck and the prospect of some hefty interest rate rises providing additional support. This aspect is where the Pound is in fact losing most of its strength. In recent weeks, the overall outlook for the British economy has been heavily hampered after data releases failed to meet consensus coupled with the still ravaging coat of living crisis. This has meant that there are persistent doubts whether the Bank of England will be able to raise interest rates much further and tensions will likely increase ahead of next week’s policy meeting. Until then, the pressure on the Pound will remain prevalent and likely keep the currency vulnerable.
GBP/EUR
After a few days of downwards momentum the rate has found enough impetus to initiate a climb upwards in a bid to erase some of the losses it experienced. This movement has been facilitated by a flip in economic concerns from the UK back to the Eurozone. This being a new development in the Russia-Ukraine situation with Russia now halting gas supplies to Poland and Bulgaria. Russia said the action was a result of the refusal of the two countries to pay for gas in Roubles and that similar measures would be taken against other countries that do the same. The move signals Russia’s willingness to weaponise gas supplies and economists see a growing tail risk that Russia retaliates to future Western actions by fully blocking supplies. With Russia being such a key component in the supply of natural gas to many European countries, this will raise concerns over what their next steps might be and has added a significant amount of strain on the Euro. This will be a key driver in the Pound-Euro rate for the time being, with investors likely to remain glued onto any developments.
Published by Frank Brightman (28/04/2022)