Markets await ECB Interest Rate Decision
Daily Currency Update
The Euro lost ground yesterday after the German economy contracted for the fourth month in a row. Analysts said manufacturing has slumped for over a year now and their view is that after two consecutive quarters of negative growth, this may tip the Eurozone into recession for the second half of this year.Sterling got a lift yesterday after good employment data in the UK. The Bank of England believes that a period of low growth and easing in the job market will help bring inflation lower.
In the US Treasury yields dipped from multi-year highs and the Dollar’s recent rally is showing signs of fatigue. Positioning in the US currency has been overbought and an unwinding of positions is adding to the Dollar’s decline.
Key Movers
The ECB meets this Thursday to set an interest rate policy. The council will be balancing significantly lower growth against the backdrop of persistently high inflation, and this presents a very difficult decision. Markets do predict that interest rates will remain unchanged.In the UK Sterling is expected to trade sideways while markets look to see if the economy can stabilise. Data has remained flat and uninspiring and with rates remaining high it may be into 2024 before the economy begins to grow again.
Federal Reserve chair Powell is due to speak tomorrow ahead of the Federal Reserve’s interest rate meeting. Treasury yields dipped yesterday and if this trend continues, we could see the Dollar lost further ground vs major currencies.
Expected Ranges
- GBP/USD: 1.2100 - 1.2250 ▲
- GBP/EUR: 1.1425 - 1.1550 ▲
- GBP/AUD: 1.9000 - 1.9150 ▲
- EUR/USD: 1.0525 - 1.0675 ▲