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Euro at its lowest point against the Pound in almost two years

Andrew Saks, Wednesday, 24 November 2021

Euro at its lowest point against the Pound in almost two years

So stagnant have the currency markets been for so many years now that even the most seasoned traders among the FX trading community can remember just a handful of 'white knuckle ride' events in the past two decades which have been interesting punctuation in an otherwise completely non-volatile market.

The previous periods of volatility in the major currencies had been caused by a few very unusual events, such as the Swiss National Bank's sudden and unexpected removal of the peg on the EURCHF pair in 2015 which caused tremendous price moves and actually claimed the entire existence of some FX brokerages which went bankrupt due to negative client balances, and made a big hole in the balance sheets of some Tier 1 banks, as well as large, institutional market makers.

It was huge news at the time, and for a few days the wild ride continued and traders, banks and brokers alike worked hard to try to come up on the right side of it. Some market makers made a fortune; some traders made a fortune, whereas some went out of business altogether.

Very soon after that, however, the major currencies were back to their even keel, with very little movement.

We have seen parity between the Euro and the Dollar briefly a few years ago, but that was hardly a volatile market, it was just a price parity which lasted for a few weeks and then slowly moved toward a very slight difference.

Now, however, there is a new contributing factor, and the Euro is at its lowest point against the British Pound in almost two years.

The GBPEUR pair is now sitting at 1.19, which although cannot be considered to be the product of massive volatility, is at least a milestone as it has not been at this level since February 2020.

The reason itself is hardly surprising. Given that the European Union now has no jurisdiction over the United Kingdom in a post-Brexit world, and the rampant plotting by leaders in certain European countries - largely those with some of the biggest economies on the mainland such as the Netherlands, Germany and Austria, to subjugate their citizens to more lockdowns.

These lockdowns debiliate economies and destroy livelihoods, and the public discourse across Europe has been tremendous, whilst in the United Kingdom, it's business as usual, no civil unrest, no lockdowns and the difference is marked.

Investors and analysts realize that the Pound's prowess is demonstrable considering that there is every likelihood that the government has not attempted to retrace the steps it took during the course of 2020 because the British economy is vital on the world stage, and has taken such a dent that the public will likely seek retribution if they attempt it again.

Given the potential of lockdowns in Europe and the lack of such (thus far!) in the United Kingdom, it is a clear sentiment that the UK economy has an apparent advantage over that in the Eurozone should the status quo remain.

This time, there is literally no complex mathematics behind it; it’s quite simple. Lock people down = go broke. Live and let live = prosperity.

 

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