Euro trims gains following Putin comments

Philip McHugh December 8th 2022 - 2 minute read

The euro enjoyed upbeat economic data yesterday morning, but struggled to hold its gains following troubling rhetoric from Russian President Vladimir Putin.

This morning, Sterling is softening across the board. GBP/EUR is ticking lower at €1.1583 while GBP/USD and GBP/CAD are both down at $1.2165 and CA$1.6637, respectively. GBP/AUD and GBP/NZD are also softer, trading at AU$1.8109 and NZ$1.9156.

Today, speeches from European Central Bank (ECB) President Christine Lagarde are in focus. With the ECB interest rate decision due next week, her comments could have a big impact on EUR.

What’s been happening?

The pound strengthened yesterday amid news that the UK and US have signed a new deal to double American gas exports to Britain. The hope is that by increasing supply from the US, the UK will be less exposed to further supply and price shocks in Europe.

Meanwhile, the euro also firmed in early trade after German industrial production and Eurozone third-quarter GDP growth printed higher than market estimates.

However, comments from Vladimir Putin trimmed EUR’s gains in the afternoon. Putin said the war in Ukraine would likely be a ‘lengthy process’ and warned of a ‘growing’ nuclear threat.

Although these geopolitical worries weighed on the market mood, the safe-haven US dollar weakened. Falling US Treasury yields dragged the ‘greenback’ lower.

What’s coming up?

The focus for EUR investors today will be the first of two speeches from European Central Bank President Lagarde.

Speaking ahead of the ECB’s interest rate decision next week, and following last week’s larger-than-expected cooldown in Eurozone inflation, Lagarde could have a significant impact on the single currency. Will dovish comments dent the euro?

Meanwhile, the UK’s lack of data continues. As a result, Sterling will likely continue to trade on domestic developments.

As for the US dollar, the latest initial jobless claims figures from America could drive movement. The ‘greenback’ could stumble if unemployment claims rise more than forecast.

Other than this, risk appetite could affect both the safer US dollar and the riskier pound.

Written by
Philip McHugh

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