Home Daily Commentaries Euro steadies as price of oil falls

Euro steadies as price of oil falls

Daily Currency Update

Sterling appears to be treading water against the US dollar ahead of key central bank interest rate decisions later this week. GBP/USD is hovering just above 1.30 before tomorrow’s much anticipated policy decision from the US Federal Reserve. A potential hike of 0.25% from the Fed seems all but assured, however it will be the messaging over future moves that will likely be of most interest to investors.

Thursday lunchtime sees the turn of the Bank of England to announce its policy decision with a potential hike of 0.25% likely. Like the Fed, the future moves of the Bank of England will be of key interest so the accompanying text of the monetary policy summary could be much scrutinised. Since the last rate rise from the BoE we have seen the invasion of Ukraine by Russia, which has put further upward pressure on energy prices, pushing Brent crude oil up through $100 a barrel. Bank of England Governor, Andrew Bailey, has a tricky balancing act of trying to control rising prices which necessitates higher interest rates without stalling an economy which may be impacted by the conflict in Ukraine. GBP/EUR has slipped back a touch to around 1.1850 as the euro pares some of its losses of recent weeks.

Key Movers

Russia's invasion of Ukraine continues. The price of oil has fallen back towards $100 a barrel. This fall is likely in part due to countries such as China and India continuing to accept Russian oil. Also a flare up in COVID-19 cases is leading to renewed lockdowns in China which has likely added some downward pressure. The falling price could be a reason why EUR/USD briefly rallied above 1.10, with lower energy prices helping the Eurozone given its reliance on Russian energy exports. As well as dealing with an outbreak of COVID-19, China is also under pressure from the US not to help Russia in the war. The fragile geopolitical situation, as well as the prospect of a series of interest rate hikes from the US, could be why stock markets are again trading lower and the US dollar remains strong.


Expected Ranges

  • GBP/USD: 1.2995 - 1.3120 ▼
  • GBP/EUR: 1.1800 - 1.1920 ▼
  • GBP/AUD: 1.8030 - 1.8210 ▲
  • EUR/USD: 1.0930 - 1.1080 ▲