There is little economic data coming out for the next few days in the run up to Christmas and trading volumes at this time of year are often a lot less which can lead to increased volatility for exchange rates. Indeed, it is estimated that there is 40% less volume for EURUSD during the Christmas period.
Sterling Euro exchange rates have seen a drop of over 5 cents since the first week of December following the news from the ECB that QE would be extended by another 6 months and the deposit rate has been cut to -0.3%.
The reason behind such strength for the Euro was that this was less than expected but also good news in that the ECB has finally done something to combat falling inflation.
The risk to the value of the Euro this week is likely to come from Spain where elections are being held.
The vote did not result in any party forming a majority which means a coalition will need to be formed.
This news has not yet been reflected in exchange rates but depending what happens over the next few days we could see more swings for Sterling vs the Euro.
With the US Federal Reserve having increased interest rates themselves this month we have seen GBPUSD rates drop below 1.50 and we could see further falls for the Pound vs Dollar when US GDP is published tomorrow afternoon.
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