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Euro wavers amid European gas shortage fears

currency-newsEuro wavers amid European gas shortage fears
The euro was subdued on Wednesday, amid concerns over European energy security.

Meanwhile, trade in the pound is mixed this morning, with GBP/EUR slipping to €1.1710 and GBP/USD muted at $1.1963. GBP/CAD is subdued at C$1.5409, while GBP/AUD and GBP/NZD hold steady at AU$1.7378 and NZ$1.9262, respectively.

All eyes will be on the European Central Bank (ECB) today as it concludes its latest policy meeting, with either a 25bps or 50bps rate hike.

What’s been happening?

The euro ticked lower during yesterday’s session, amid fresh fears of a European gas shortage following a warning from European Commission President Ursula von der Leyen.

Von der Leyen suggested that there is a good chance that Russia could completely cut off gas flows to the continent, with the EC urging countries to cut their gas use by 15% to help stave off a shortage later in the year.

The pound, meanwhile, also struggled to attract support on Wednesday, following the release of the UK’s consumer price index.

While inflation printed above expectations, it failed to move the dial regarding expectations for a 50bps interest rate hike from the Bank of England (BoE) next month.

At the same time, the US dollar traded with modest gains yesterday, snapping a three-day losing streak as investors favour the safe-haven currency amid a risk-off mood.

What’s coming up?

In the spotlight today will undoubtedly be the ECB’s latest interest rate decision, in which the bank is set to deliver its first rate hike in a decade.

The big question is whether the ECB will opt for a 25bps or 50bps hike this month. The euro firmed earlier this week as investors began to price in a potential 50bps hike. This could trigger a sharp drop in EUR exchange rates if the bank opts to play it safe this afternoon.

In the meantime, the euro is attracting some support from the news that gas flows through the Nord Stream pipeline have resumed this morning, albeit at a reduced pace.

A lull in this week’s UK data blitz could see the pound driven by political developments today, as the Conservative leadership race enters its final leg.

Meanwhile, the US dollar’s fortunes are likely to remain tied to market sentiment today, with USD exchange rates potentially firming if a risk-off mood continues to prevail.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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