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Sterling hits lowest level since mid 2020

Sterling hits lowest level since mid 2020

GBP

Sterling has fallen 0.5% to its lowest since mid year 2020. 1.2250 is acting as the short term resistance level, as general market risk aversion has led to US dollar demand. The Bank of England’s gloomy outlook, has been informed by China’s continued covid restrictions, G7 sanctions on Russia and further Brexit woes due to events in Northern Ireland. Secretary of state for Foreign Affairs – Liz Truss has threatened to suspend the Brexit deal, in the wake of the Northern Ireland assembly election results. The result confirmed that the Irish nationalist party, Sinn Fein would be the largest party and therefore reinforced constitutional and Brexit concern.

 

EUR

On Friday, ECB members Nagel and Villeroy expressed a willingness to raise interest rates in the euro zone. Nagel – the Bundesbank President – expressed that while growth is forecast to continue slow, recession is not yet a concern. Nagel believes that the argument for tighter monetary policy measures are weakening and that the current state of the economy in the eurozone is robust. 

 

USD

The dollar hit a two-decade highs vs EUR on Monday as investors searched for safety and yield in the face of growing concern over slowing global economic growth and rising interest rates. Surging inflation, the war in Ukraine, and tighter lockdowns against COVID 19 in Beijing and Shanghai, have left investors uncertain on many things, but the FED have been very clear in indicating that U.S. interest rates are going up this year. This certainty in the face of so much global uncertainty, will ensure USD remains well supported.

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