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The pound declines for the fourth consecutive day

Wednesday 20 April, 2022

Daily Currency Update

The pound dropped below 1.30 against the US dollar on Tuesday, with GBP/USD falling for a fourth consecutive day amid doubts over the Bank of England's policy path and increased political uncertainty. Sterling fell 0.2% against the US dollar to 1.2980, well within striking distance of a November 2020 low. Against the euro, the pound was 0.3% lower, retracing all the gains seen after the European Central Bank decision on Thursday. Data released last week showed British consumer price inflation jumping in March to 7%, its highest in three decades, but money markets have slightly dialled down expectations for how much the BoE could raise interest rates in the rest of the year. Money markets are currently pricing in around 146 basis points of potential further tightening this year, which would take the base rate to the 2.00%-2.25% range.

Key Movers

The euro did not react to new French election polls that showed that current President Emmanuel Macron's lead widened on Tuesday. Three different polls for the runoff with Marine Le Pen presented the highest level for the President since before the election. Some market commentators continue to favour EUR/USD potentially heading lower as a result of a widening divergence between the US Federal Reserve’s and ECB’s response to elevated inflationary pressures. Whilst the ECB is currently expected to do little more than end its QE programme and may implement a few interest rate hikes by the year’s end, some Fed members are even now talking about a potential 75 bps rate hike at next month’s meeting. Should this be the outcome, we could see the dollar strengthen.

Expected Ranges

  • GBP/USD: 1.3005 - 1.3085 ▲
  • GBP/EUR: 1.2005 - 1.2065 ▲
  • GBP/AUD: 1.7415 - 1.7555 ▼
  • EUR/USD: 1.0815 - 1.0865 ▲