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3rd April

Top Currency Pairs Monday 3rd April 04:00 UTC GBP/USD: 1.22775 (Last Week: 1.22573) EUR/USD: 1.07909 (Last Week: 1.07711) GBP/EUR: 1.13777 (Last Week: 1.13685)

Market News

Pound Sterling The British Pound found some support on Friday after UK GDP exceeded forecasts. In fact, the British economy expanded 0.1% in the fourth quarter of 2022, beating previous estimates that the economy had stalled. Moreover, the British public's expectations for inflation, a crucial indicator for the Bank of England as it weighs another interest rate hike, cooled in March. In fact, public expectations for inflation in 12 months' time eased to 5.4%, down from 5.6% in February, while expectations for the longer term slipped to 3.7% from 3.8%. However, despite this upbeat data, Sterling saw some downward pressure as investors repositioned end-of-quarter trades, injecting volatility into the currency market. In turn, the British Pound opened this morning’s trading session in a mixed range as interest rate hike bets varied and high food inflation highlighted the ongoing cost-of-living crisis. Looking forward, a lack of significant data from the UK leaves the Pound poised to follow market sentiment and Dollar price dynamics.

Euro The Euro continues to search for a clear direction as activity at struggling factories across the euro zone fell further last month and consumers feeling the pinch from rising living costs cut back. In fact, Euro zone manufacturing remains in troubled waters, with factories reporting a fall in demand for goods for an eleventh straight month amid the surging cost of living, tighter monetary policy, a shift to inventory destocking and subdued customer confidence. Looking forward, price action around the single currency should continue to closely follow Dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding potential next moves in interest rates. Although hawkish ECB-speak continues to favour further rate hikes, many analysts are starting to believe that this view appears in contrast to some loss of momentum in economic fundamentals in the region – which could further weigh on the bloc’s single currency.

U.S. Dollar The U.S. Dollar has been mustering some strength in early European trade this morning as surging oil prices raised inflation concerns, which could prompt the U.S. Federal Reserve to lift interest rates at its next meeting. In fact, the Dollar Index traded 0.4% higher at 102.56, after earlier breaking past 103 for the first time in a week. The index had dropped 1.8% in March, pressured by concerns that turmoil in the banking sector would hit economic activity, prompting the Fed to pause its monetary tightening cycle earlier than previously expected. This view was given a degree of credence after data on Friday showed U.S. consumer spending rose only moderately in February after surging the prior month, with inflation showing some signs of cooling. However, yesterday’s surprise decision of the Organization of Petroleum Exporting Countries to cut production once more by just over 1 million barrels per day has sent oil prices soaring, changing the narrative. Since inflation is likely to remain the biggest driver of the Fed’s monetary policy, the market will be less likely to assume an early shift to lower rates.

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Disclaimer: This is not investment advice; it is for informational purposes only.


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