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Bank of England leaves borrowing costs unchanged at 5.25%
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Daily Currency Update
In Europe, the Vice President of the European Central Bank (ECB), Luis De Guindos, stated that they will not commit to any actions beyond their rate cut in June. This statement gained context when another ECB council member, Robert Holzmann, mentioned that an oil price shock could potentially hinder the anticipated rate cut in June. Consequently, the Euro found support following these hawkish comments.The UK recently released GDP figures for the first quarter of this year, indicating a growth of 0.6%. This signifies a period of expansion since the second half of 2023 when the economy experienced a mild recession. Market expectations were set at 0.4%, hence Sterling received support following this release.
The US Dollar continues to garner support based on hawkish interest rate expectations. However, a less optimistic outlook arises when considering the weaker labour data released last week. The Federal Reserve’s “higher for longer” interest rate policy is likely straining the US job market.
Key Movers
The Euro area’s economic fundamentals have been relatively subdued recently, especially when considering the strength of the US economy and the expected rate cuts by the ECB in June. Consequently, the single currency will probably remain weak against both the Pound and the Dollar over the next month.Optimistic economic data in the UK suggests that the UK economy is poised for a soft landing, as the Monetary Policy Committee (MPC) anticipates inflation to return to 2%. Importantly, with robust GDP figures just released, it’s likely that their inflation target will be achieved without pushing the UK economy into a recession. This is expected to support the Pound in the coming month.
In the US, the direction of the Dollar could be influenced by the upcoming April inflation data scheduled for release next Wednesday. This data will shed light on the likelihood of the Federal Reserve’s first interest rate cut in September of this year. In the meantime, additional statements from Federal Reserve members will guide the direction of the US Dollar.
Expected Ranges
- GBP/USD: 1.2500 – 1.2570 ▲
- GBP/EUR: 1.600 – 1.645 ▲
- GBP/AUD: 1.8940 – 1.900 ▲
- EUR/USD: 1.0750 – 1.0815 ▲
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