The euro gained sharply versus sterling and the US dollar yesterday in swings that will hit Irish exporters.
The biggest move was in the pound which plunged against the euro and other world currencies after European Union negotiators effectively shut the door to further Brexit negotiations unless the UK stands by the Withdrawal Agreement signed this year but which the UK now says it won't honour.
The euro hit 92 pence having started the week under 89 pence, a big swing that will hit margins of Irish exporters in the UK but boosts the purchasing power of retail and business customers of British firms.
"Its really not good in the short and medium term for Irish exporters," Investec's Justin Doyle said.
The move in sterling reflects a renewed belief that UK prime minister Boris Johnson's government will not strike a post-Brexit trade deal next month and so driving the UK to crash out of the single market at the end of the year and hampering its ability to strike deals with other nations.
"Quite how the UK is going to agree multiple new trade agreements with partners around the world whilst openly flouting international treaties is a question that GBP (sterling) is answering in resounding fashion in its decline," HSBC said in a note to clients.
The euro was also boosted by comments from European Central Bank President Christine Lagarde who pointedly refrained from guiding the market to expect actions that might weaken the single currency after its recent gains versus the dollar.
"Clearly to the extent that the appreciation of the euro exercises negative pressure on prices, we have to monitor carefully such a matter, and this was extensively discussed in the Governing Council," she said.
Earlier the Bloomberg newswire reported that ECB policy-makers had agreed not to "overreact" to the currency's gains.
The dollar has weakened after the US Federal Reserve indicated last week it would allow inflation to rise further before raising interest rates.
President Lagarde said she expects her central bank to plough ahead with its already announced stimulus measures including the €1.35 trillion Pandemic Emergency Purchase programme to pump cash into the economy, but no more. ECB council members believed the existing measures were both "efficient and effective", she said.
While Christine Lagarde stressed that she would not comment on the level of the euro, what she did say was enough to prompt the euro relationship to the dollar to "take off", according to Investec's Justin Doyle.
The ECB kept interest rates unchanged, and announced a slight upgrade in its 2020 growth forecast, buoyed notably by improved consumer demand, and to its forecast for inflation in 2021 and maintained its position of some inflation in 2020.
The euro gained to a one-week high of $1.1888. Ms Lagarde and chief economist Philip Lane are both due to speak in public over the course of today, providing an opportunity to soften their commentary depending on market movements, Justin Doyle said.