US dollar continues to surge
Daily Currency Update
It was another tough day for the pound yesterday as GBP/USD continued its recent freefall, being forced lower by concerns over the UK economy and geopolitical risks driving investors to the safety of the US dollar. GBP/USD is now under 1.26 and has dipped to its lowest level since July 2020, as Russia announced that it is going to turn off the taps on its gas supply to Poland and Bulgaria.As mentioned yesterday the pound’s cause is not being helped by concerns about the consumer spending squeeze which manifested itself in a weak March retail sales reading last week. High inflation is meaning households are having to rein in spending, and with commodities traded in US dollars in global markets, it means the drop in GBP/USD could lead to even higher inflation than previously thought later in the year. Domestically it is another quiet day on the data-front so expect geopolitics to be front and centre in potentially guiding sterling's direction. GBP/USD is around 1.2550. GBP/EUR is at around 1.1830.
Key Movers
Russia is ratcheting up the pressure on Ukraine and its allies with confirmation that it is going to stop supplying Poland and Bulgaria with gas starting from today. Russia has decided to cease supply in response to each country’s decision not to pay for its gas in rubles. Demand for gas is naturally lower as we head into spring, however alternative sources will be needed. Stock markets are actually in positive territory today, however the euro is under severe pressure from the move. EUR/USD has hit a five year low, briefly dipping under 1.06, a level it managed to stay above even during the peak of the COVID-19 crisis.Like the Bank of England, policy makers at the European Central Bank have a difficult path regarding controlling rising prices in the face of slowing economic growth. EUR/USD is now trading back above 1.06, however if more European countries are threatened with gas cut-offs then the shared currency could be heading towards parity versus the super-strong US dollar.
Expected Ranges
- GBP/USD: 1.2500 - 1.2630 ▼
- GBP/EUR: 1.1760 - 1.1890 ▼
- GBP/AUD: 1.7500 - 1.7675 ▲
- EUR/USD: 1.0550 - 1.0680 ▼