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Euro strengthens to 2-week highs

Euro strengthens to 2-week highs

The Pound was held back as the fishing spat between the UK and France yesterday intensified, although the market was moved more by the rising volatility in bond yields. Higher UK inflation forecasts meant expectations remained that the Bank of England would raise interest rates next week. Although usually a positive move, it does bring concerns that it could damage the UK economy and undermine international confidence. Also, there are expectations that global central banks would adopt a more hawkish policy stance which in relative terms would lessen the potential for Sterling strengthening on a UK rate hike.

Yesterday’s ECB monetary policy meeting saw confirmation that changes to asset purchases programmes (APP and PEPP) are going to be announced on 16 December when the ECB releases its new economic projections.

Sterling failed to hold above 1.3800 to the dollar while the Euro strengthened to 2-week highs near 1.1800. Today being month end and a Friday bring the risk of position adjustment having a significant impact on prices. The Pound opens just below 1.3800 on Friday with the Euro at 1.1820.

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