The euro retreated on Friday amid fresh jitters in Europe’s banking sector.
Meanwhile, Sterling is trading sideways at the start of this week, with GBP/EUR flat at €1.1370 and GBP/USD stable at $1.2251. GBP/CAD is rangebound at CA$1.6815, while GBP/AUD and GBP/NZD hold steady at AU$1.8397 and NZ$1.9732, respectively.
Could we see more banking sector chaos inject fresh volatility into the currency market this week?
What’s been happening?
The euro closed last week’s session on a sour note as Europe’s banking sector was back in crisis mode after shares in Deutsche Bank plummeted.
Fresh signs of weakness in Europe’s banking sector sapped EUR sentiment as it quashed hopes that the UBS-Credit Suisse merger had contained the risk of contagion.
The renewed banking sector jitters overshadowed the release of the Eurozone’s latest PMI figures. Which may have otherwise bolstered the euro after reporting a stronger-than-expected expansion in the bloc’s private sector this month.
The US dollar rallied on Friday as the bank selloff sapped risk appetite and underpinned demand for the safe-haven currency. Although these gains were tempered somewhat after the latest US durable goods orders report disappointed.
Meanwhile, the pound traded with modest gains at the end of last week as it was buoyed by a surprisingly strong UK retail sales print.
What’s coming up?
Another week begins with Europe’s banking sector in the spotlight, potentially leaving the euro to face headwinds at the start of the session.
On top of this EUR sentiment may also be influenced by the publication of Germany’s IFO business climate index. Could a deterioration in business sentiment this month pile more pressure on the euro?
In the UK, the Confederation of British Industry’s (CBI) latest distributive trades index could drag on the pound if March’s release reports a decline in retail sales volumes.
Meanwhile, ongoing market jitters may see skittish investors continue to favour the US dollar at the start of this week.
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