The euro slumped on Thursday following the European Central Bank’s (ECB) latest interest rate decision.
Meanwhile, the pound is heading lower this morning, with GBP/EUR falling to €1.1749, although GBP/USD has bounced to $1.2249. GBP/CAD is a little softer at C$1.5858, while GBP/AUD and GBP/NZD have slipped to AU$1.7736 and NZ$1.9568, respectively, after rising overnight.
In today’s session, will an expected recovery in the eurozone’s balance of trade bolster the struggling euro?
The pound slipped during Friday’s session as investors became increasingly concerned about the future of the UK economy.
What’s been happening?
A renewed row over the Northern Ireland protocol spooked GBP investors, who fear that scrapping the deal could lead to an EU-UK trade war. Meanwhile, the country’s cost-of-living squeeze shows signs of choking off the economy.
At the same time, the euro also faced selling pressure. The Kremlin’s aggressive rhetoric regarding Finland joining Nato continued to act as a headwind for EUR.
Additionally, a contraction in eurozone industrial production hurt the euro. The single currency also suffered from its negative correlation with the US dollar as the US dollar index (DXY) rose to a fresh 20-year high.
The overall strength in the US dollar came despite a modest rise in risk appetite, as Federal Reserve rate hike bets underpinned the ‘Greenback’.
However, a large slip in US consumer sentiment put a dent in USD at the end of the session.
Turning to today, the eurozone’s latest balance of trade figures could potentially bolster EUR. Economists expect trade to have returned to a surplus in March.
What’s coming up?
However, the Ukraine crisis could overshadow any economic data.
There’s no UK data due out today. As a result, Sterling could trade primarily on domestic headlines.
If Brexit tensions continue to bubble, or if the cost-of-living crisis rattles investors, GBP could struggle.
US data is also fairly thin on the ground today, so USD could trade primarily on risk appetite.