Pounds springs forward as banking fears fall back
Monday 27 March, 2023
Daily Currency UpdateThe pound has started British Summer Time on the front foot this morning helped by improving market sentiment over the state of the US and European banking sector. The pounds movement is mirroring an uptick in global equity markets with some believing the crisis that engulfed banks throughout March may be abating and hopefully coming to an end. Today brings a relatively quiet docket from the UK however this evening we have Bank of England Governor, Andrew Bailey giving a speech at the London School of Economics. As usual comments on future policy moves re: interest rates will be the main area of intrigue after last week’s 0.25% hike. His thoughts on whether the recent uptick in CPI a blip and the stresses on banks was that have come to fore of late will also be things to watch out for. GBP/USD is back up to around 1.2250 this morning after dropping below 1.22 on Friday. GBP/EUR is pushing up towards the 1.14 level again.
Key MoversShares in Deutsch Bank have rebounded in early trade this morning after a large sell off on Friday caused concern that another major bank considered "too big to fail" could follow Credit Suisse and collapse. Although there is still some fears about the impact a series of aggressive rate hikes from central banks around the world will have on lenders German Chancellor, Olaf Scholz spoke over the weekend saying there was "no reason to be concerned" about the state of DB's balance sheet. Last week saw some wild swings in EUR/USD with it jumping on the back of the US Federal Reserve’s interest rate decision with it cracking the 1.09 level for the first time since early February. These gains were quickly unwound however as DB and also Commerzbank saw their value plummet dragging EUR/USD lower with them eventually coming close to 1.07. We are back up to 1.0760 at the time of writing with Germany's monthly IFO Business Climate survey giving some support to the shared currency. The closely watched survey of around 9k German businesses about economic conditions has beaten forecast coming in at 93.3 when 91 was predicted. Looking ahead we have the first reading of March Eurozone inflation on Friday with CPI expected to fall however the core component which strips out food and fuel costs will likely be the more closely watched measure. This is expected to push up to 5.7% from 5.6% y/y. From the US it’s a quiet start to the week however Fridays Personal Consumption Expenditure release (another measure of inflation that the Federal Reserve pays particular attention to) is the next major dataset to look out for. Last months unexpected rise created huge market volatility.
- GBP/USD: 1.2180 - 1.2330 ▲
- GBP/EUR: 1.1340 - 1.1450 ▲
- GBP/AUD: 1.8340 - 1.8500 ▲
- EUR/USD: 1.0700 - 1.0830 ▲