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All eyes on central bank policy updates

Daily Currency Update

Aside from geopolitical developments in Ukraine, the main event this week is Wednesday's interest rate decision from the US Federal Open Market Committee. Like the Bank of England, the Fed is expected to raise rates by 0.25%, so again it will be information on future moves the markets will likely be looking out for. US annual inflation is around 7.9% y/y at the moment, well above the Fed’s 2% target so this will likely give the Fed license to raise rates a few times more this year. Some analysts see a hike at all of the remaining seven policy decisions, however some are expecting a pause over the summer while Fed members take stock of the situation. The US Dollar Index was trading at 98.75 at the time of writing.

Key Movers

The Bank of England monetary policy decision is due on Thursday. Markets have priced in a 0.25% interest rate hike as well, similar to the Fed. Should the bank hike interest rates, then attention will turn to the Monetary Policy Statement and any clues it could reveal about future moves by the bank. Many expect another hike in May, however concerns over Russia and Ukraine could cause the bank’s Monetary Policy Committee to question whether raising rates in such a volatile environment is a wise idea. A lot will likely depend on the data that we see ahead of the May 5th meeting. GBPUSD was sitting around 1.3043 at the time of writing.

Expected Ranges

  • EUR/USD: 1.0904 - 1.0985 ▲
  • GBP/USD: 1.301 - 1.307 ▲
  • AUD/USD: 0.7227 - 0.7298 ▼
  • USD/CAD: 1.2729 - 1.2789 ▲