UK Budget due this week
Monday 21 March, 2022
Daily Currency UpdateLast week the Bank of England raised interest rates once more by 25 basis points, raising the rate from 0.5 to 0.75% in response to rising inflation in the UK. The pound did not rise in the way that many anticipated, largely due to the cautious comments that followed the hike regarding the Russia-Ukraine war.
Looking ahead to this week there are several events that could impact the pound. Chancellor Rishi Sunak is due to announce the budget on Wednesday, and Bank of England Governor Andrew Bailey is due to speak the same day. Furthermore UK inflation data is due this week with it expected to show a rise to the 6.0% mark. UK PMIs and retail sales are also due later in the week with both figures expected to show a slowdown. Both are likely to have some impact on the pound depending on whether or not these expectations are met. The pound starts the week off at around 1.1885 vs the euro and around 1.3150 vs the US dollar.
Key MoversThe US dollar retreated towards the end of last week with EUR/USD pulling back to around 1.1060 and GBP/USD to around 1.3180. This all happened despite the US Federal Reserve raising interest rates by 25 basis points for the first time since the pandemic began, the first hike in the US since December 2018.
The fact that the US dollar did not strengthen too much, suggests that the interest rate hike had already been priced into the market prior to the announcement. The US dollar pushed higher early Monday during the Asian trading session but will likely trade within a narrow range in the run up to Fed Chair Jerome Powell speaking later today. The US dollar index – which measures the value of the US dollar against a basket of other major currencies – was trading slightly higher at around 98.26.
The euro made major gains vs the US dollar last week rising by 1.23%, its first weekly gain vs the US dollar since January. Volatility has been caused in part by ongoing talks between Russia and Ukraine. The euro has stabilised this morning but comments from Fed Chair Jerome Powell later today could cause some movement for the pair.
- GBP/USD: 1.3095 - 1.3185 ▼
- GBP/EUR: 1.1865 - 1.1950 ▼
- GBP/AUD: 1.7750 - 1.7845 ▲
- EUR/USD: 1.1025 - 1.1105 ▲