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Central Bank meetings take center stage

Tuesday 3 May, 2022

Daily Currency Update

It’s a big week for the pound, with the Bank of England scheduled to meet on Thursday. As a result, most major GBP currency pairs could remain fairly stagnant until Thursdays meeting. The BoE have hiked rates three times so far this year already and another rate hike this Thursday looks almost certain – it is simply a case of whether it will be a 25bp hike or a 50bp hike (raising the rates to either 1% or 1.25% respectively). The markets are expecting the UK interest rates to reach 2% by the end of the calendar year, so the BoE’s stance on further hikes is in the focus given the recent negative comments around this. The pound currently is sitting at 1.2535 vs the dollar as it attempts to recover some of its losses from Monday when it fell close to 100 pips.

Key Movers

The dollar had an incredible April, with gains of nearly 6% against a basket of its major rivals. As a result, the Federal Reserve seem to be taking a slightly more aggressive view on their monetary policy, with certain FOMC members suggesting in order to curb inflationary pressures we could see several 50bp hikes over the summer. This is likely to kick off tomorrow with a 50bp hike fully priced in to the meeting, meaning the markets will be listening out for further guidance from the Federal Reserve around future rate hikes. Over the last few years, the dollar has been very sensitive to interest rates, so this could be an interesting few months ahead for the dollar. The euro continues to struggle against a number of its major rivals, with EUR/USD barely holding above 1.050 currently. This is due to ongoing Russia-Ukraine troubles spreading their way into the Eurozone as well as a strengthening dollar vs the pound. The euro sits at 1.1930 and with both the BoE and FOMC to meet this week, the currency could be at risk of losing further ground against both of its major rivals.

Expected Ranges

  • GBP/USD: 1.2480 - 1.2575 ▲
  • GBP/EUR: 1.1870 - 1.1955 ▲
  • GBP/AUD: 1.7560 - 1.7690 ▼
  • EUR/USD: 1.0480 - 1.0565 ▼