Markets anxiously await several key interest rate decisions this week
Written by
Daily Currency Update
In Europe the ECB could be seen as the first Central Bank to start cutting rates from June. Expectations are for the Euro to move lower in the coming weeks as markets increase expectations for additional interest rate cuts through the rest of 2024.The British Pound remains at a seven-month high vs the Dollar and Euro. The Bank of England meets this week to set interest rate policy as the market expects no change to support further growth in the UK economy.
US inflation remains stickily high creating significant concerns for the Federal Reserve as it meets to decide interest rate policy this week. Market expectations reflect continued Dollar strength as stable and higher rates prevail.
Key Movers
The Euro will likely trade softer this week as market expectations for an ECB rate cut in June ramp higher. As inflation in the Euro bloc softens and growth sputters it leaves the ECB in a precarious position when setting interest rate policy.In the UK the Pound awaits inflation data and the Bank of England's interest rate decision this week. The currency should trade sideways before any announcement. Investors expect no change in rates as UK inflation remains stubbornly high and above the MPC's 2% target rate.
We see upside risk for the US Dollar this week as the Federal Reserve hints at less interest rate easing through 2024. Economic data remains strong in the US but inflation is simply not falling enough to warrant the level of interest rate cuts as was expected by the markets.
Expected Ranges
- GBP/USD: 1.2700 - 1.2800 ▲
- GBP/EUR: 1.1650 - 1.1750 ▼
- GBP/AUD: 1.9350 - 1.9450 ▼
- EUR/USD: 1.0850 - 1.0950 ▲