Published: 01/03/2023 By ECAP
Sterling continues to edge higher, having surged 1% at the start of the week after Britain and the European Union announced a new deal for post-Brexit trading arrangements, known as the Windsor Framework. This brightened the outlook for the post-Brexit UK economy, with Prime Minister Rishi Sunak saying it would clear the way for a new chapter in London's relationship with the bloc. Rishi Sunak was in Northern Ireland and then met with his own lawmakers yesterday to sell the new deal. As investors and analysts explore the details of the new deal, hopes for a stronger UK-EU trade relationship as well as improving global market sentiment continue to boost Sterling.The Euro recouped some lost ground yesterday as markets cheered the revival of activity in the world's second-largest economy, and Europe’s biggest exporter, following China's exit from its stringent COVID policies late last year. Moreover, and further supporting the bloc’s single currency, inflation in two of the euro zone's biggest economies rose unexpectedly in February, pushing up rate hike expectations by the European Central Bank.
The US dollar retreated in early European trade this morning while a basket of major currencies rose after economic data pointed to a recovery in the second largest economy in the world, sparking risk-on sentiment. However, investors reeling from the recent volatility in global financial markets are eyeing a potential worry: a rebounding dollar. The dollar has risen nearly 4% from its recent lows and stands near a seven-week high. This rebound has created further headwinds to global markets as a stronger dollar tends to tighten global financial conditions while diminishing appetite for risk-taking and weakening global trade.