Positive European Central Bank meeting
Friday 11 March, 2022
Daily Currency UpdateA few data releases for the UK came out this morning including Construction output, Industrial production, and Manufacturing production - all beating expectation. The main release to take note of was UK GDP month on month which came in at 0.8% vs an expected 0.1%. The positive data will likely further contribute to the expectation that the Bank of England will potentially hike rates at next Thursday’s meeting. ING reported that a 30bp hike has already been priced into the market.
Key MoversRates were kept unchanged in the European Central Bank meeting yesterday, with the asset purchase program continuing to be wound down. The plan is for it to be wrapped up by Q3 this year depending on further Eurozone data. The euro initially rallied with EUR/USD briefly getting above 1.11 before retracing. GBP/EUR also fell towards 1.1850 before bouncing back up during ECB President Lagarde’s press conference. In a pre-war environment, the euro may well have been able to hold on to its gains, but it pulled back relatively quickly. There are doubts over whether the ECB will decide to raise rates before the end of the year given the huge uncertainty weighing on the euro area due to the ongoing Russia-Ukraine conflict. However, some still expect there to be a 25bp hike in interest rates by October. US Inflation data released yesterday came in on target at 7.9% year on year which was another 40 year high. The market expectation is for a 25bp hike at the US Federal Reserve’s next policy decision next week with more to come after that. Banks have reduced their expectation on the total number of rate hikes over the course of the year due to ongoing events in Ukraine. All in all, the US dollar may continue to benefit from its safe haven status in the coming weeks. Traditionally, investors tend to move towards the US dollar during uncertain times.
- GBP/USD: 1.3005 - 1.3110 ▼
- GBP/EUR: 1.1855 - 1.1940 ▼
- GBP/AUD: 1.7790 - 1.7885 ▲
- EUR/USD: 1.0955 - 1.1040 ▼