The euro weakened against both sterling and the US dollar yesterday, not so much in response to any particular data release, but rather as investors and central banks continued to rally to the opinion that the single currency is an unattractive prospect at this point in time. European Central Bank (ECB) President Mario Draghi has kept his options open regarding more aggressive monetary policy, while the Bank of England and Federal Reserve have both given indications that they will be tightening monetary policy and raise interest rates at some point. This has caused the euro to weaken against other major currencies as investors look to move away from euro positions. As a result, we saw the euro-US dollar rate drop well below the 1.35 barrier again. As rates hover around key technical levels we may see further sharp movements.
We look to Thursday for the next key data releases from the Eurozone which will highlight how “robust or not” the Eurozone economy is.