Hard to be a Euro bull at the moment with the shared currency facing its weakest value against the buck since December 2016.
Overview
Without a doubt, the war and the energy crisis that comes with it are affecting the outlook for European stability as well as growth. Add to it a recent return to concern over the Northern Ireland protocol that brings back Brexit worries to the table.
If prices are climbing in America, believe that pressures will only continue for the Euro-zone. Still, we think there is more room for improvement and growth rather than this being the start of a deeper depreciation.
What to Watch Today…
- No major economic events are scheduled for today
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EUR
The Euro has kept its gains, for now, after a week that saw the deflation of the buck as data did not seem to match the intentions of the Fed. More importantly, this week has seen some officials raise their voices about the European Central Bank’s need to consider controlling high inflation.
In particular, energy prices on the other side of the Atlantic have made it very difficult for companies to do well and political friction has complicated the effectiveness of natural gas and oil from other nations. ECB member Luis De Guindos echoed the sentiment of others in saying that the inflation being experienced may not be transitory.
GBP
Sterling is down to its weakest point since 1985 following the inflationary signs from the U.S. as well as a belief that the U.K. will not avoid a technical recession second half of the year and into 2023.
Gross Domestic Product figures this morning pointed at a slower pace than desired for Q1 at 0.8% vs. 1.0% expected. Indeed, the Pound saw these sinking rates around the time of the Brexit result shocking markets in June 2016.
