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Political tensions continue to simmer in the UK

Tuesday 1 February, 2022

Daily Currency Update

Political tensions in the UK continue to rise, with the release of Sue Gray’s report and an on-going police investigation on a number of lockdown gatherings that took place involving government officials. GBP/EUR lost some ground yesterday, but it is unlikely to have been caused by this political noise. Instead this was more likely caused by high CPI figures for Germany and a rise in Eurozone bond yields, with the Euro posting gains of 0.6% vs the US dollar and 0.4% vs sterling. GBP/EUR slipped below the 1.20 handle as a result but the likelihood of a Bank of England rate hike on Thursday may keep the pair underpinned and prevent it from losing any further ground.

Key Movers

The US dollar was unable to hold onto its impressive gains from last week on Monday, despite all the noise around numerous interest rate hikes in 2022. This was likely just a blip however with the overall feeling that there could be some USD positive movement over the next few months. There is speculation of five rate hikes over the course of this year starting potentially with a 50bp hike at the March US Federal Reserve meeting. Looking at the day ahead there are two main releases, one within the Eurozone and one for the US. For the Eurozone we will see the unemployment rate for December released with the jobless rate forecasted to trend lower. And from the US, ISM Manufacturing data is due to be released and expected to edge lower. This may not be significantly impactful on currency unless we see some results way outside of these forecasts.

Expected Ranges

  • GBP/USD: 1.3430 - 1.3520 ▲
  • GBP/EUR: 1.1955 - 1.2030 ▲
  • GBP/AUD: 1.8985 - 1.9070 ▼
  • EUR/USD: 1.1230 - 1.1285 ▲