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The euro gained sharply against the British pound and the US dollar yesterday in swings that will hit Irish exporters.
The biggest move was in the pound, which tumbled against the euro and other world currencies after European Union negotiators effectively closed the door to further Brexit negotiations unless the UK abides by the signed Withdrawal Agreement. this year, but which the UK now says it will not comply with. .
The euro hit 92 pence after starting the week below 89 pence, a big change that will affect margins for Irish exporters in the UK, but increase the purchasing power of companies’ retail and commercial clients. British.
“It’s really not good in the short to medium term for Irish exporters,” said Investec’s Justin Doyle.
The sterling move reflects a renewed belief that British Prime Minister Boris Johnson’s government will not reach a post-Brexit trade deal next month, prompting the UK to exit the single market at the end of the year and hamper your ability to strike. deal with other nations.
“How the UK is going to agree on multiple new trade deals with partners around the world while openly disobeying international treaties is a question that the GBP is responding forcefully in its decline,” HSBC said in a note to customers.
The euro was also boosted by comments from European Central Bank President Christine Lagarde, who deliberately refrained from guiding the market to expect actions that could weaken the single currency after its recent gains against the dollar.
“Clearly, as the appreciation of the euro puts negative pressure on prices, we have to carefully monitor this issue, and this was widely discussed in the Governing Council,” he said.
Earlier, the Bloomberg news wire reported that ECB policy makers had agreed not to “overreact” to the coin’s gains.
The dollar has weakened after the US Federal Reserve indicated last week that it would allow inflation to continue rising before raising interest rates.
President Lagarde said she hopes her central bank will go ahead with its already announced stimulus measures, including the pandemic emergency purchase program of 1.35 trillion euros to inject cash into the economy, but nothing more. The ECB’s board members believe the existing measures are “efficient and effective,” he said.
Although Christine Lagarde stressed that she would not comment on the level of the euro, what she said was enough to propel the euro’s relationship with the dollar “to take off”, according to Investec’s Justin Doyle.
The ECB kept interest rates unchanged and announced a slight improvement in its growth forecast for 2020, driven notably by improving consumer demand and by its inflation forecast in 2021 and maintained its position of some inflation in 2020 .
The euro rose to a one-week high of $ 1.1888. Both Lagarde and chief economist Philip Lane will speak publicly later today, providing an opportunity to soften their remarks depending on market movements, Justin Doyle said.
Irish independent
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