The euro rose and then fell again this afternoon (May 2nd) on the back of the news that the European Central Bank (ECB) has cut interest rates from 0.75 to 0.5 per cent.
Andy Scott, premier account manager at foreign currency exchange brokers HiFX, explained there was a short recovery for the euro in the immediate aftermath of the ECB's announcement.
But the currency lost value again when president of the ECB Mario Draghi gave a news conference to explain the decision to cut interest rates later in the afternoon.
"We continue to favour a move to 1.20 for sterling against the euro in the near term given the recent run of better than expected data from the UK," said Mr Scott.
He added the ECB was given little choice but to cut interest rates at a time when governments across the continent are having to cut spending and reduce budget deficits.
The ECB's cut to 0.5 per cent represents a new record for European interest rates.
Learn about the sterling and forex trading at City Index.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.