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Daily market commentary: The pound is losing ground to the euro as tensions rise over the Northern Ireland protocol
The pound is losing ground to the euro during early Thursday trading, as investors start to price in the increase in tension between the UK and the EU, over the so-called Northern Ireland protocol. Amidst a foreign exchange market that, so far this week, has been quieter than usual as investors await the publication of US inflation and the ECB’s policy statement later today, sterling is the outlier currency in terms of volatility. The pound had so far this year performed better than its peers, due to a successful vaccination campaign and the end of political uncertainty over Brexit. However, with the looming possibility of a trade war between the EU and the UK, over the latter’s reluctance to adhere to the terms of Northern Ireland protocol, the type of uncertainty that penalised the pound in the run up to Brexit may be about to return.
Oil prices are falling on Thursday, following the release of inventory data in the US that showed a surge in gasoline stocks. Recent oil price gains resulted, to a large extent, from investors expecting more demand from the end of lockdowns and the usual increase in driving experienced during the summer months. However, data is showing that a return to past levels of oil demand can’t be taken for granted, at least not in the near term, which could mean some downside risk for crude prices.
European indices slid shortly after the opening bell on Thursday, despite a positive trading session in Asia, as investors brace for a busy day on the macro front. Market sentiment remains uncertain and volatility is on the rise as investors hope they will finally get more clues on where monetary policies will go next after today’s important data release. Traders’ focus is likely to stay in Europe for the first part of today’s trading session as the ECB’s rates decision and press conference are looming. After that, investors will switch their attention to the other side of the Atlantic with the highly anticipated US CPI report that is expected to show a significant decrease in inflation. If the transitory effect of inflation, as anticipated by the Fed, turns out to be confirmed, then the chances of an extended rally on stocks will be on the rise.
Pierre Veyret– Technical analyst, ActivTrades
Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
