The pound continues its decline against the US dollar
Daily Currency UpdateThe pound started the week by falling roughly 0.75% versus the US dollar yesterday, caused by mixed market sentiment and some US dollar strength. Sterling declined when Bank of England Governor Andrew Bailey gave a speech on Monday. Bailey said, “we have been very cautious on forward guidance language because things are so uncertain” and when asked about May’s rate decision Bailey went on to say that the current situation is very volatile.
Markets are pricing in 135 basis points of interest rate hikes by year-end, this is down from 145 basis points just before Bailey’s speech, including a 55% chance of a 50 basis point interest rate hike in May. It remains to be seen whether any further rate hikes will provide any GBP strength as the most recent interest rate rise did little to move GBP higher against the USD and EUR.
Key MoversYesterday, the US dollar was supported by expectations of an interest rate hike by the US central bank. The US dollar index pushed up around 0.42% yesterday. The Russia-Ukraine conflict, and China's latest COVID-19 outbreak, have kept investors uneasy. Safe-haven currencies such as the US dollar tend to increase in value during times of global risk and uncertainty.
The euro remains weak with the latest data from the GfK institute showing that German consumer morale looks set to slump heading into April as the Russia-Ukraine war impacts economies in Europe. A speech from European Central Bank president Lagarde and the release of the EU unemployment rate are due Wednesday and Thursday respectively. Christine Lagarde's speech could give us an insight into what the ECB is likely to do with regard to policy action come April. The ECB are yet to change their interest rates, unlike the Bank of England and Federal Reserve who have already begun increasing their interest rates.
- GBP/USD: 1.3055 - 1.3125 ▼
- GBP/EUR: 1.1870 - 1.1945 ▼
- GBP/AUD: 1.7395 - 1.7485 ▼
- EUR/USD: 1.0960 - 1.1025 ▼