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25th April - Weekly FX Update

Top Currency Pairs Monday 25th April 9:00 UTC GBP/USD: 1.27464 (Last Week: 1.30389) EUR/USD: 1.07431 (Last Week: 1.08080) GBP/EUR: 1.18648 (Last Week: 1.20641)

Market News

Pound Sterling Pound Sterling took a turn on Friday as UK consumer confidence levels fell while the cost-of-living crisis continues to worry the public. However, the real drivers were from US rhetoric and the French presidential election. The Pound opened this week lower against the Dollar as Jerome Powell's hawkishness all but confirmed aggressive rate hikes at the next meeting. Against the Euro, Macron's election victory gave the European currency a brief boost, sparing the markets the shock and uncertainty of a Le Pen win. It is difficult to see how far Sterling's decline may go, but all eyes are on the Bank of England (BoE) meeting on the 5th May. Until then, the markets will be guided by interest rate speculation with limited data released this week. Andrew Bailey, the BoE governor is once again set to speak on Thursday.

Euro The Euro received a nice boost on Sunday as Emmanuel Macron defeated Marine Le Pen to be re-elected as French president. Many analysts claimed a 'Brexit-like shock' would have occurred if Le Pen was victorious as the markets had underestimated the risk of a surprise. Macron secured 58.5% of the vote, allowing the Euro to open higher against the Pound, but actually lower against the Dollar. The markets have breathed a quick sigh of relief, but the focus moves back to geopolitical matters which continues to weigh on global markets. This week, the German economy will see IFO Business Sentiment released, with a small dip expected.

U.S. Dollar The Dollar picked up some headwind at the end of last week, as speculation around rate hikes in the near future were practically confirmed by Federal Reserve (Fed) chair Jerome Powell. Speaking at the International Monetary Fund on Thursday, Powell as good as committed to a 50bps rate hike in May, which promptly sent stocks and bonds down, with the S&P 500 falling heading into the weekend. Investors are now pricing in a third consecutive 50bps rate hike before the end of 2022. Powell's extreme hawkishness combined with the Bank of England's cautiousness and the European Central Bank's reluctance to move interest rates has powered the Dollar forward in the currency markets.

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