Top Currency Pairs Monday 28th March 9:00 UTC GBP/USD: 1.31557 (Last Week: 1.31513) EUR/USD: 1.09782 (Last Week: 1.10556) GBP/EUR: 1.19839 (Last Week: 1.18956)
Pound Sterling The CPI figures released last Wednesday showed inflation reached a new 30-year high last month in the UK, increasing expectations that the Bank of England (BoE) should act more aggressively at the next policy meeting on the 5th May 2022. Unfortunately for the Pound, the market response was somewhat different, with the UK currency faltering against other G10 currencies which may show uncertainty as to whether or not the BoE will meet market expectations. Shortly following this announcement which may have also contributed to lack of strength in the Pound was Rishi Sunak's Spring Statement. Sunak's new measures did not boost sentiment, receiving backlash for doing little to help struggling households, promising future tax cuts and submissive in countering rising energy costs. As a result, the Pound remained sluggish throughout the rest of the week. Amid a light economic calendar this week, Andrew Bailey is set to open with a speech which could be a possible driver for the Pound, followed by GDP on Thursday.
Euro Europe's economy slowed in the first couple of weeks of March with the war in Ukraine impacting supply chains, spiking energy and raw materials prices. In response to the invasion, some forecasts have practically cut growth in half to just 1.7% for the year, with much of the global economic slowdown predicted to occur in the Eurozone. Meanwhile, the European Central Bank said last week that it will tighten the banks access to liquidity from July, a move which is another step closer to ending the extraordinary COVID support measures. In the markets, the Euro is holding up well against the Pound as risk balances between the two, where the GBP/EUR is struggling for momentum beyond 1.20. Looking ahead to this week, consumer confidence will be released in Germany, followed by German inflation later in the week.
U.S. Dollar Last week, Federal Reserve Chair, Jerome Powell, opened the door for a 50bps rate hike at the next meeting, signaling unease at the surging US inflation. This gave some immediate strength to the Dollar with markets pricing in a more aggressive monetary policy. Looking ahead, developments in Ukraine and the Fed's policy outlook will continue to fuel sentiment for the US currency. The US employment report will come into focus, which is due on Friday. The consensus is another strong month for the labour market, with nonfarm payrolls forecasted for a 15th straight month of job gains. Wage growth is expected to increase and the unemployment rate should be lower.
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