GBP/USD falls to March 2020 low
Daily Currency UpdateIt was a difficult day for the pound yesterday as global economic concerns, and the prospect of the US Federal Reserve potentially hiking interest rates by 0.75%, saw GBP/USD hit its lowest level since March 2020. GBP/USD dropped under 1.20 for the first time since the world was in the grips of the first wave of the COVID-19 pandemic and briefly dipped below 1.1950 before recovering overnight.
Holders of sterling are also likely jittery ahead of tomorrow’s Bank of England interest rate decision which could see Governor, Andrew Bailey, issue further warnings about the fragility of the economy in the face of slowing growth and soaring inflation. The consensus is that a 0.25% hike will likely be implemented by the BoE, however 0.5% isn't off the table which could add support to the pound.
However the markets may be concerned that an aggressive hike could put an economy that has stalled into reverse, given the extra pressure higher borrowing costs would have on consumers already struggling with price rises not seen in a generation. GBP/USD is currently around 1.2020 with GBP/EUR back under 1.15.
Key MoversTonight sees the much anticipated interest rate decision from the US Federal Open Market Committee with markets expecting another 0.5% hike to combat inflation which is currently at a 40 year high.
Last week saw CPI unexpectedly rise to 8.6% y/y which has heaped pressure on policy makers at the Fed to raise rates further than previously expected throughout the rest of the year, so we shouldn't be surprised if policy makers decide a 0.75% rise is warranted.
The recent stock market turbulence caused by the aforementioned US CPI print has led the European Central Bank to call an emergency meeting this morning. It is unclear whether they are also going to raise interest rates, however we should get a statement from ECB head, Christine Lagarde, later this morning explaining the reasons for the unscheduled get together. EUR/USD trades at around 1.0470.
- GBP/USD: 1.1900 - 1.2090 ▼
- GBP/EUR: 1.1430 - 1.1615 ▼
- GBP/AUD: 1.7385 - 1.7545 ▼
- EUR/USD: 1.0385 - 1.0550 ▲