The euro hit four-month lows against the pound yesterday and is still struggling against the dollar as eurozone PMIs disappointed markets and hawkish comments from the Federal Reserve benefit the greenback.
In its economic bulletin, the European Central Bank suggested that although the eurozone economy was on track to return to pre-crisis levels in Q1 of 2022, there was “still a long way to go” before the effects of the pandemic on inflation are offset.
According to the ECB, there are 3.3 million fewer people employed than before the pandemic, with younger and lower-skilled workers worst affected.
The ECB said that interest rates would remain at their current, or lower levels, until inflation reaches 2%. This difference in views to the Bank of England is contributing to the euro’s current weakness.
