Quiet week leaves currency markets range bound
Wednesday 26 April, 2023
Daily Currency UpdateThe pound remains supported by the narrative that the Bank of England has more work to do to quell UK inflation which remains stubbornly high above 10%. The market remains pricing in a 25-basis point rise in the next meeting by the central bank in May, and bar some significant surprises, this will be expected to play out. The ceiling that interest rates in the UK may reach has now also been raised to above 5%, though the market will watch the impact of the higher energy costs 12 months ago, dropping out of the CPI readings next month. Inflation in the UK remains higher than many of its European counterparts, as the economy struggled with a post Brexit lag in labor availability and rising wages.
Key MoversEURUSD remains in narrow ranges this week, hovering either side of the 1.1000 mark, the eurozone calendar is quite empty and the predominance of news coming from the US on the banking and equity sector leaves EURUSD even more driven by the US Dollar. The release of quarterly earnings in the US continues to paint a better picture for American businesses, with big tech companies beating estimates yesterday. However, concerns about the US banking sector have returned after First Republic’s shares dropped 49% following the larger-than-expected drop in deposits and announced restructuring plans.
Though the US Dollar rallied slightly yesterday on this banking news, which drove risk aversion in the market and a stronger US currency, expectation is that the currency may take its medium term direction more from what the Federal Reserve will do rather than any single US banking story
- GBP/USD: 1.2420 - 1.2510 ▼
- GBP/EUR: 1.1245 - 1.1325 ▼
- GBP/AUD: 1.8840 - 1.9045 ▲
- EUR/USD: 1.0980 - 1.1055 ▲