GBP/USD slides to near two-week lows, around mid-1.3100s

The latest GBI slide show reveals that the US Dollar and the Euro are making headway against the GBP/USD. Although a stronger dollar is always a positive, a weaker euro can be a big worry in the UK market. At this time it is not even clear that the euro will remain strong in the long term. The Euro is also facing difficulties that are not being felt on a global scale.

For example the weakness of the euro is being felt in many nations, including Ireland, Spain, Greece, Portugal, Italy and others. For instance, in Ireland the FTSE has fallen by more than 4% this week. It has lost ground for the month to date as well.

It may be a little difficult for the Euro to regain its strength now that the European Central Bank (ECB) has launched quantitative easing. As an indicator of the weakness of the currency in the past, the EUR/GBP fell to more than 1.3 in June 2020 and has since continued to decline.

The weakening of the euro is being seen in countries like Switzerland, where it is seen as a negative for the Swiss Franc as well. It is also being felt in many countries where the economic situation is not very favorable, such as Spain, Italy and Portugal.

In a recent speech at the Oxford Institute for International Studies in London the President of the European Central Bank, Mario Draghi, mentioned the possibility of a “French moment” when the euro rises to over one hundred dollars. It is possible that this is only a short-term event, especially if the weak euro zone economies continue to falter. In the long run the euro will probably remain above one hundred dollars in terms of purchasing power.

So the GBI slide show is telling us that it is a positive sign for the European currency but there is still a long way to go before it rises above two-week lows. This is one reason why the GBP/USD continues to be in a consolidation mode.

In addition, the weakening of the euro has been seen in many areas of the world such as Italy, Spain, Portugal and Greece and in a few other nations like the Czech Republic and Austria. It is not just the euro that are weakening, but the other currency pairs, too, including the British pound and the U.S. dollar.

The weak euro is showing the world that the European Central Bank is worried about the weakening of the euro and that it is thinking of ways to help stabilize the currency. Although the Bank has not actually taken any action yet, it is possible that it will do so soon. When the situation stabilizes, the euro will fall back towards a strong dollar level.

The GBI slide show is also showing us that the global economy is showing signs of weakness. Even countries that were strong before the global economy took a turn for the worse are now seeing major dips in their economies.