GBP/EUR touched fresh yearly highs throughout Asian trading during Sunday night and Monday morning. Despite falling back slightly through the open of European hours, you would have to look back on the chart to 20th February 2020 to be able to secure a similar exchange rate. Cable is not tracking as well, unfortunately for dollar buyers, as the uptick on GBP/EUR comes mainly from a surge of euro weakness, opposed to pound strength. EUR/USD finds itself in a dire state at 1.1270, at the time of writing, losing nearly 3.8% since the end of October.
The single currency weakness yet again relates back to Covid induced lockdowns in European nations, with both the Netherlands and Austria returning to restrictions on the population last week. This not only dampens sentiment within the Eurozone near term, but also longer term coupling up with hawkish comments from the European Central Bank.
Despite the price movements for GBP/EUR predominantly coming from euro weakness, there is also positive momentum bubbling away for sterling. After the interest rate decision in November, sterling took a big blow. Since then, however, inflation and job data has strengthened the argument for a rate hike in December. The saying in markets of ‘buy the rumour and sell the fact’ was apparent before the decision in November and UK PMI data released tomorrow could support a rate increase for the meeting in last month of the year
Have a great day.
Author: Jack Nicholls, Senior Relationship Manager.
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