Home Daily Commentaries Euro hits five year low

Euro hits five year low

Daily Currency Update

GBP/USD remains under pressure briefly dipping under 1.25 earlier this morning, its lowest level since July 2020 as geopolitical tensions over Russia/Ukraine and concerns about lockdowns in China see investors flock to the safety of the dollar. The uncertainty over the UK's economic outlook isn't helping the pound, however it's not the only currency to see weakness due to the current turmoil the world finds itself in. Its been a quiet week data-wise from the UK so next weeks key Bank of England interest rate decision on May 5th is the next domestic event that will drive the value of the pound. A hike is expected however the messaging from Governor Andrew Bailey about the health of the economy and how high rates could go will be the main area of focus. GBP/USD has recouped some losses and is back above 1.2550. GBP/EUR is up to 1.1915.

Key Movers

The euro is taking a battering at the moment as the ongoing war in Ukraine and the aggressive rhetoric coming from Vladimir Putin sends the shared currency lower. The prospect of Russia, Europes biggest energy supplier turning off the taps to more countries saw EUR/USD drop under 1.05 for the first time in five years earlier this morning. Poland and Bulgaria have already had their supplies cut off for refusing to pay for Russian gas in roubles and it will be interesting to see if more countries refuse or cave into the Kremlins demands. The shockwaves that would be felt if Russia stopped supplying Germany with gas was highlighted yesterday with Vice-Chancellor Robert Habeck saying it would instantly send the country into a deep recession knocking up to 5% off the economic output of the country. The dollar is also gaining strength on a super weak yen (USD/JPY is the worlds second most traded currency pair) as the Bank of Japan continues to print money to stimulate its economy in stark contrast to the action scheduled by the US Federal Reserve which is expected to raise rates by 50bp on May 6th. EUR/USD is around 1.0560 at present with USD/JPY above 130, a level not seen in around 20 years!

Expected Ranges

  • GBP/USD: 1.2480 - 1.2620 ▼
  • GBP/EUR: 1.1840 - 1.1970 ▲
  • EUR/USD: 1.0480 - 1.0620 ▼
  • GBP/AUD: 1.7470 - 1.7650 ▼