Euro turbocharged by ECB’s surprisingly hawkish shift

Euro turbocharged by ECB’s surprisingly hawkish shift

Central bank policy speculation has been a key driver of currency movement over the past couple of weeks and had infused the FX market with some notable volatility.

During this time, we’ve seen GBP/EUR fall back from €1.20 to €1.19, whilst EUR/GBP climbed from £0.83 to £0.84.

Meanwhile, GBP/USD climbed from $1.34 to $1.35, while EUR/USD surged from $1.11 to $1.13.

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Staying on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for over the next couple of weeks…

What’s been happening?

A surprisingly hawkish turn by the European Central Bank (ECB) earlier this month shifted EUR dynamics over the past couple of weeks, with the single currency reversing some of this year’s losses as investors begin to price in an ECB rate hike by the end of 2022.

At the same time, speculation the Federal Reserve will raise interest rates by a half-percent in March helped to limit the US dollar’s losses so far this month.

Meanwhile, the Bank of England (BoE) actually delivered a rate hike this month, which alongside a broadly hawkish outlook from the bank helped underpin the pound and offset mounting UK political jitters.

What do you need to look out for?

Looking ahead, the very real possibility of a military conflict between Russia and Ukraine looms large over currency markets, with the euro likely to be particularly sensitive to threat of war in Europe.

For GBP investors the focus is likely to remain on UK politics, with the pound vulnerable to the release of any more politically damaging headlines regarding Boris Johnson.

Across the pond, the US dollar looks well positioned to appreciate in the coming weeks, as Fed rate hike bets and market jitters likely bolster the appeal of the safe-haven currency.

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