GBP
Last week saw the Sterling climbing to its highest level against the Euro for more than two months as the single currency slipped below parity against the Dollar and the Pound benefited briefly from UK GDP data that came in much stronger than markets anticipated.
The Pound to Euro exchange rate has retreated from near two-month highs and could potentially fall further this week if all goes well for the European Central Bank (ECB) later this week.
USD
The dollar remained very much in the ascendancy on currency markets last week. Its position of dominance stems from favourable interest rate differentials, with the Fed well ahead of the other main central banks in terms of rate hikes and hawkish guidance.
EUR
Looking to the week ahead, given the significant role that interest rate differentials are playing on FX markets, Thursday’s ECB meeting poses some key event risks for the euro.
The ECB has guided a 25bps rate hike, which would represent its first rate rise since 2011. The market, in terms of pricing expectations, has not ruled out a 50bps hike and sees rates getting to 1% by year-end.
However, if the ECB fails to convince markets that significant rate hikes are on the cards, we could see the euro come under further downward pressure.
If you or your company are impacted by currency risk please reach out to speak to one of our experts, we can assist with decision-making during this difficult time to help you protect your profits.