The Euro has continued to strengthen on the back of hitting fresh yearly highs in the last week. With mounting pressure over another potential COVID wave, the Euro did weaken aggressively which set new highs not seen since November 2020. However, the single currency has since found a new lease of life and strengthened nearly 2 cents against Sterling and nearly a cent against the US dollar in the last 24 hours.
Omricon – a variant of COVID-19 has weakened markets with the US dollar taking the biggest hit, as the Moderna chief predicts existing vaccines will struggle with the variant, suggesting major economy recovery could be put on hold if the variant continues to spread. Adding to this, Federal Reserve Chair Jerome Powell said the Omricon variant poses a risk to both sides of the central bank’s mandate to achieve stable prices and maximum employment – which could push back a potential interest rate hike.
UK Companies are expecting to raise prices to offset raising wages and supplier issues. Expecting to have an adverse effect on UK inflation, many UK companies are expecting to raise their prices due to ongoing supplier issues which include delayed shipments and heavily increased transport costings. As the UK struggles with raising inflation, this could mean the Bank of England have to react quicker with an interest rate hike so that inflation doesn’t spiral out of control.
Across the Channel the new German government budget reality is clouding their outlook for investment plans. After the coalition deal was reached between the Social Democrats, Greens and Free Democrats to take control from Angela Merkel’s CDU party, the new German Government planned to ramp up climate-related investments as well as reviewing a host of EU-mandated spending, whilst it kept much of the country’s previous fiscal regime still to be debated.