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Pound steadies despite fresh Brexit woes

Wednesday 9 February, 2022

Daily Currency Update

The pound gained ground over the euro yesterday morning after cautious comments from European Central Bank President, Christine Lagarde, put the euro on the defensive. Another cause for Sterling’s strength yesterday morning was the recent data from the British Retail Consortium. The BRC’s latest retail sales monitor report beat forecasts, printing a figure of 8.1% rather than the expected -0.3%. Despite the ongoing uncertainty over Boris Johnson’s leadership, the pound did manage to steady the ship and hold on to most of its gains against the US dollar and euro in yesterday’s trading. More uncertainty for the pound surrounds the growing concern over the political situation in Northern Ireland – as the DUP’s Paul Givan resigned as first minister of Northern Ireland late last week in protest of the Northern Ireland protocol. The protocol requires checks on British goods arriving in Northern Ireland and its critics claim that it’s damaging the country’s place in the UK. UK and EU negotiations regarding the protocol are still ongoing and continue to act as a source of volatility for the pound.

Key Movers

Christine Lagarde triggered a sharp rise in the euro Last week, as she did not dismiss the possibility of a 2022 interest rate hike following the ECB’s latest rate decision. The markets took this as a sign that the ECB could be moving towards more hawkish policy action. Markets have now priced in rate hikes of around 0.5% by the end of 2022. However, Lagarde’s recent comments seem to have slowed the euro strength, and for now, ECB policymakers are sticking to the sequencing, starting first with tapering, before raising interest rates. It has been a quiet week for the US dollar as we wait for U.S. consumer price data tomorrow.

Expected Ranges

  • GBP/USD: 1.3520 - 1.3605 ▲
  • GBP/EUR: 1.1845 - 1.1929 ▲
  • GBP/AUD: 1.8890 - 1.8970 ▼
  • EUR/USD: 1.11385 - 1.1460 ▲