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11th April - Weekly FX Update

Top Currency Pairs Monday 11th April 9:00 UTC GBP/USD: 1.30286 (Last Week: 1.31158) EUR/USD: 1.09070 (Last Week: 1.10224) GBP/EUR: 1.19452 (Last Week: 1.18989)

Market News

Pound Sterling The Pound found some strength against the Euro last week amid a growing European energy crisis, rallying off support at 1.18 and testing the 1.20 level once again. Unfortunately, a hawkish Federal Reserve (Fed) held up GBP/USD gains as central bank minutes were published, reinforcing expectations that the Fed will tighten monetary policy aggressively. Looking ahead, in stark comparison to last week, this weeks UK economic calendar is filled with a raft of big data releases including GDP, employment and inflation figures. GDP forecasts have been reduced, employment should improve and inflation is likely to be higher than last months 6.2% figure with pre-warnings from the Bank of England (BoE). These data sets will dominate the markets until the European Central Bank (ECB) meeting on Thursday, where the Euro will likely see a more hawkish approach from policymakers. The Pound should hold up well against the Euro, but it needs a serious catalyst against the Dollar as the GBP/USD exchange rate sits near the 1.30 level.

Euro The Euro faltered last week as a threatened full-blown energy crisis for some European countries dented Euro optimism. The latest ECB minutes released did confirm a more hawkish stance from the ECB, who do not see an imminent threat to Europe's economy. However, these were based on discussions from three weeks ago and since then there has been a sharp move in Germany's inflation paired with a gloomy outlook after Putin's recent requests to pay for Russian gas in Rubles. This led to the positive minutes having little effect on exchange rates. Looking ahead, on Thursday, the ECB could end stimulus bond buying in Summer and may even be pushed into reviewing interest rates after Germany once again posted record high inflation, making this April ECB meeting a key driver for the Euro. Despite this, as long as the conflict continues in Ukraine, the prospect of limited gas supply into Europe will weigh on the Euro in the markets.

U.S. Dollar The Dollar was strong last week with other G10 currencies struggling to make headway against the greenback. After publishing US central bank minutes from the March meeting, expectations that the Fed will act aggressively in tightening monetary policy were met, giving the Dollar some footing heading into the weekend. Fed policymakers mostly agreed to cut up to $95bn a month from asset holdings to curb inflation, after raising interest rates for the first time since 2018. With a hawkish Fed and risk-averse trading, there doesn't seem to be much holding up the Dollar right now. The BoE outlook seems somewhat uncertain, and as Europe head for a full-blow energy crisis, this could leave the EUR/USD below 1.10 territory, and potentially make way for a further slide into the 1.20's for the GBP/USD exchange rate.

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