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Banking crises holds headlines

Daily Currency Update

US consumer sentiment fell for the first time in four months, with the March figures released Friday afternoon. Consumers turned negative even as their expectations for inflation improved, with the index falling to 63.4 from the previous month’s 67. Outside of macroeconomic data, eyes were firmly on the recent banking crises after the Silicon Valley Bank debacle and growing concerns over Credit Suisse, which is set to be bought out by UBS with the assistance of Swiss authorities. GBP/USD traded above 1.2100 during Friday’s session, opening closer to 1.2200 this morning. GBP/EUR has touched 1.1450 in the past couple of hours after trading above 1.1400 since Friday.

This Wednesday, the Federal Reserve policy-setting meeting is expected to see the central bank increase interest rates again, probably by 25 basis points. The Bank of England will follow on Thursday amid doubts about whether they will signal an end to its hiking cycle. Both data releases will likely add to what has been a very volatile time for the currency market and worth monitoring over this week. Today, market participants will keep an ear open for comments from ECB President Christine Lagarde as she appears before the European Parliament’s economic committee.

Key Movers

Despite banking turmoil, the European Central Bank went ahead with a planned 50 basis point interest rate hike last week. The Silicon Valley Bank collapsed last week due to bond-related losses that piled up when interest rates surged last year and this has been followed by concerns over US bank First Republic, which large US banks injected $30bio in deposits on Thursday to rescue the lender and Credit Suisse who seem to be going through a UBS buyout with Swiss authorities assistance. UK, US, and Swiss banks are all due to deliver their own interest rate announcements this week and will likely take banking developments into consideration. The FED and Bank of England are forecast to rise by 25 basis points and the Swiss National bank by 50 basis points. Any changes in these predicted rises could add to further volatility this week.

Expected Ranges

  • GBP/USD: 1.2070 - 1.2280 ▲
  • GBP/EUR: 1.1350 - 1.1490 ▲
  • GBP/AUD: 1.8110 - 1.8350 ▲
  • EUR/USD: 1.0540 - 1.0750 ▲