Home Daily Commentaries US dollar strong ahead of key central bank interest rate decisions

US dollar strong ahead of key central bank interest rate decisions

Daily Currency Update

GBP/USD is under continued pressure this morning as the US dollar continues to strengthen from safe haven flows on the back of the ongoing conflict in Ukraine. Traditionally, investors tend to move towards the US dollar during uncertain times. GBP/USD came close to the key 1.30 level during the Asian session however has since rebounded back up to around 1.3040.

The Bank of England monetary policy decision is due on Thursday. Markets have priced in a 0.25% interest rate hike into sterling's value. Should the bank hike interest rates, then attention will turn to the Monetary Policy Statement and any clues it could reveal about future moves by the bank. Many expect another hike in May however concerns over Russia and Ukraine could cause the bank’s Monetary Policy Committee to question whether raising rates in such a volatile environment is a wise idea. A lot will likely depend on the data that we see ahead of the May 5th meeting. GBP/EUR trades around 1.1930.

Key Movers

Aside from events emerging from Ukraine, the main event this week is Wednesday evening’s interest rate decision from the US's Federal Open Market Committee. Like the Bank of England, the Fed is expected to raise rates by 0.25%, so again it will be information on future moves the markets will likely be looking out for. US annual inflation is around 7.9% y/y at the moment, well above the Fed's 2% target so this will likely give the Fed licence to raise rates a few times more this year. Some analysts see a hike at all of the remaining seven policy decisions, however some are expecting a pause over the summer whilst Fed members take stock of the situation. EUR/USD trades at around 1.0965.

Expected Ranges

  • GBP/USD: 1.30 - 1.3120 ▼
  • GBP/EUR: 1.1870 - 1.1975 ▼
  • GBP/AUD: 1.7930 - 1.8060 ▲
  • EUR/USD: 1.0890 - 1.1045 ▼