20th June - Weekly FX Update

Top Currency Pairs Monday 20th June 9:00 UTC GBP/USD: 1.22450 (Last Week: 1.22207) EUR/USD: 1.05268 (Last Week: 1.04768) GBP/EUR: 1.16322 (Last Week: 1.16645)

Market News

Pound Sterling The Bank of England (BoE) saved the Pound last week with an interest rate rise to 1.25%. This marked the highest central bank rate since 2009 after the Bank noted in their statements that the Pound Sterling was seeing a period of weakness, explaining they were keen to tackle this issue along with surging inflation. The Pound was initially lower before Thursday's announcement after the latest three-month GDP figures were revealed. Analysts expected growth of 0.2%, but the actual figures came in at -0.3%. Quarterly results also disappointed at 0.2%, after expectations of 0.4% Looking ahead to this week, inflation figures will be the key data set, scheduled to be released on Wednesday. It is expected to be higher than April's reading after the BoE said UK inflation will rise to 11% in Autumn.

Euro The Euro was subjected to some losses last week after other central banks made the decision to hike interest rates, meanwhile German inflation met expectations with a rise to 7.9%. More recently, news broke that French President Emmanuel Macron lost his absolute majority after voting saw a surge in opposition voters, falling short of 298 seats. Macron will keep control but it will be much harder to pass legislation, having to rely on coalitions on various topics. The EU has also announced new legal moves against Britain in an official response regarding the Northern Ireland Protocol which will increase the volatility of the trading pair. The week ahead is light in the economic calendar, so the Euro will look to external factors for market movements.

U.S. Dollar Last week marked the biggest interest rate hike by the Federal Open Market Committee (FOMC) since 1994, as the Federal Reserve (Fed) announced a 75bps increase on Wednesday. Fed Chair Jerome Powell also left the door open for further increases of that magnitude, with investors looking favourably upon the central bank's tough stance against inflation. Markets had initially been predicting a 50bps move, but after strong inflation figures expectations were shifted and it ultimately pushed the Fed to act aggressively. This was broadly supportive of the already very strong US Dollar. Powell's testimony on Wednesday and Thursday is in focus for the Dollar, as he provides his report on monetary policy just days after the central bank's rate hike. He is expected to echo his commitment to taming inflation, which was labelled as "unconditional" after it increased at the fastest pace since 1981.

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