The euro’s strong start to the year has given UK exporters and importers in Europe a very positive market opportunity after a dismal 2015. One euro currently buys around 76 pence. Exactly two months ago one euro bought 71 pence – a near seven per cent difference. The EUR/USD rate surged through the $1.10-$1.11 price range to its highest in three months ahead of Friday’s key US non-farm payrolls and unemployment reports. As more investors start to predict little to no chance of another US rate hike in 2016, weaker-than-expected US data could possibly help extend losses for the US dollar.

US dollar

The US dollar has depreciated by 2.9 per cent in just two days against the euro. US payrolls, or jobs growth, is expected to come in at 190,000 in January. This would mark a sharp drop from the previous month’s 292,000 and below the typical 200,000 threshold which economists tend to watch. Having lost three per cent and 3.5 per cent against Sterling and the euro respectively this week, stronger-than-expected US labour market data today could halt US dollar selling. However, as more investors start to predict little to no chance of another US rate hike in 2016, weaker data today could help extend one of the worst weeks of USD selling in years.

Sterling

The pound has fallen by 1.5 per cent against the euro as both UK monetary policy and political uncertainties increase this week. The GBP/EUR rate is now back at one-year lows around the €1.30-€1.28 price range. The Bank of England’s MPC voted 9-0 in favour of no UK rate rise, a slightly dovish shift from the previous 8-1 vote. In the accompanying press conference and quarterly inflation report, Governor Mark Carney downgraded the bank’s inflation and GDP predictions and pushed a potential rate rise further into the future. While investors remain very sceptical about reacting to opinion polls, against consensus expectations one YouGov poll this week suggested more people in the UK actually favour leaving the EU.

Euro

Despite more dovish rhetoric from ECB president Mario Draghi this week about the prospects of more monetary easing in the eurozone, the single currency has surged to its strongest levels since October 22 against the US dollar. Global risk aversion and poor US economic data continue to support demand for the euro. The EUR/USD rate has climbed by over 3.5 cents over the past few before Friday’s influential US non-farm payrolls report.

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