GBP / EUR UPDATE

GBP markets can be a bit like dory from Finding nemo some days, forgetting what happening previously and needing an almost constant reminder that everything is o.k. the past two weeks could be a good example of this it seems. ecB head christine lagarde reallygets this, and has been constantly visible over the past week, doubling down on the ecB’s commitment to fighting inflation, suggesting that there was ‘no tradeoff ’ between fighting inflation and supporting stability in the banking system. Whilst lagarde reiterated that future rate hikes will be data dependent,she made no excuses for the ecB’s commitment to tackle inflation and did not mix her words. it felt like her draghi moment. having raised rates by 50bps to 3.5% last week, the strong messaging from the ecB has helped to fuel market-implied expectations for further rate hikes, especially given the unexpected increases amongst regional inflation of late. on that note, both Spain and Germany will be releasing their latest inflation reports through next week, with the former expected to decline, but key German inflation has been forecast to increase over the past month. regional inflation is also released a little later in the week. the single currency has had a week to remember. Buoyed by the hawkish comments from lagarde, and further fuelled by a weakening dollar, eUr/ USd surged beyond 1.0900, having been as low as 1.0516 on the 15th march. With the Fed looking as though they are nearly at their terminal rate (see USd), further upside gains could still be achieved, as expected rate differentials fuel the single currency.

EURO markets can be a bit like dory from Finding nemo some days, forgetting what happening previously and needing an almost constant reminder that everything is o.k. the past two weeks could be a good example of this it seems. ecB head christine lagarde reallygets this, and has been constantly visible over the past week, doubling down on the ecB’s commitment to fighting inflation, suggesting that there was ‘no tradeoff ’ between fighting inflation and supporting stability in the banking system. Whilst lagarde reiterated that future rate hikes will be data dependent,she made no excuses for the ecB’s commitment to tackle inflation and did not mix her words. it felt like her draghi moment. having raised rates by 50bps to 3.5% last week, the strong messaging from the ecB has helped to fuel market-implied expectations for further rate hikes, especially given the unexpected increases amongst regional inflation of late. on that note, both Spain and Germany will be releasing their latest inflation reports through next week, with the former expected to decline, but key German inflation has been forecast to increase over the past month. regional inflation is also released a little later in the week. the single currency has had a week to remember. Buoyed by the hawkish comments from lagarde, and further fuelled by a weakening dollar, eUr/USd surged beyond 1.0900, having been as low as 1.0516 on the 15th march. With the Fed looking as though they are nearly at their terminal rate (see USd), further upside gains could still be achieved, as expected rate differentials fuel the single currency.

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