Currency Note

Pound stronger against euro, weaker against dollar

By Alex Bennett April 20th, 2022

Sterling is still well-supported against the euro this morning. However, it is weaker against the dollar after falling to an 18-month low at the beginning of the week.

The euro is still struggling due to reports that Russia launched a new offensive in the Donbas region of Ukraine on Monday. This, along with no indication that the European Central Bank will raise interest rates soon, has weighed on the single currency. Tomorrow’s eurozone inflation data could impact the euro also.

Data released this morning revealed that factory gate prices in Germany jumped to 30.9% in March, reflecting the impact that the Ukraine war is having on the German economy.

Meanwhile, it’s a different story for the dollar, which has strengthened due to increased expectations that the Federal Reserve could raise interest rates quicker and more aggressively than originally predicted.

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GBP: Pound still strong against euro

The pound is still strong against the euro this morning following a strong week last week. However, it is still suffering against the dollar.

This strength against the euro is largely due to weakness from the single currency. As well as this, the pound is outperforming a range of currencies due to the UK being less dependent on Russian energy compared to other nations, as well as rising UK interest rates.

It’s a light week for UK data, however, retail sales figures for March will be released on Friday. The figure is expected to stay the same month-on-month but drop slightly year-on-year.

GBP/USD past year

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EUR: Euro weaker due to Russian offensive and ECB

The euro is weak against the pound and the dollar this morning.

Russia launched a new offensive in the Donbas region of Ukraine on Monday, which has weighed on the single currency. As well as this, the European Central Bank’s meeting last week, in which officials did not hint at any upcoming interest rate rises, also weakened the euro.

Today, industrial production figures will be released for the eurozone, followed by inflation rate data tomorrow. Inflation is expected to have risen in March year-on-year and month-on-month.

USD: Dollar strong following Fed speech

The dollar has strengthened since Monday after Federal Reserve official, James Bullard, said that the central bank needs to move quickly to raise interest rates to 3.5% this year and that large increases shouldn’t be ruled out.

This has confirmed to the markets that US interest rates will continue to be raised this year and is a sign that the US economy is recovering. Rising treasury yields have also supported the greenback this week.

There will be more speeches from Fed officials today and tomorrow, Federal Reserve Chair, Jerome Powell, will speak. The markets will be listening to see if any comments support Bullard’s remarks.

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