Market Update

USD strength continues to be the theme of this week, with the safe-haven currency set for it’s best month since 2015. The prospect of aggressive rate hikes in the U.S., in the form of three 50bps hikes in upcoming meetings along with an uplift in demand for The Dollar due to growing concerns for economic growth in the wake of what seems to be uncertainty around when lockdowns in Beijing and Shanghai will come to an end.

These combining factors have seen GBP/USD slip below 1.25 (levels not seen since the pandemic first hit) and EUR/USD fall below 1.05.

The EUR has been under immense pressure of late, bringing its losses throughout April to 5% which again would be it’s worst performing month since 2015. Traders and markets are currently seeing a further drop past $1.03 which would be an area not seen since 2002.

The major reason behind the slide in the Euro is due to economic troubles as The Bloc is forced to raise the cost of energy priced in Dollars, with Russia now cutting off supplies to both Poland & Bulgaria. If the cut-off extends to other major importers within Europe we could see a drop in the rates, potentially moving closer to parity. As it stands, The ECB are in favour of rates being moved up to 0.5% by the end of 2022, however if this energy war continues in a damaging way then rate hikes altogether could be off the table.

Later today we have inflation release for Germany, and there shouldn’t be any surprises with figures expected to be above 7%. The Euro-Area also have their figures released on Friday and again expectations show inflation currently soaring above 7%, putting even more pressure on The EUR.

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