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Key interest rate decisions today

Thursday 15 December, 2022

Daily Currency Update

Early data on Wednesday saw UK consumer prices rose by 0.40% on the month in November, resulting in an annual rise of 10.7%, a small drop from 11.1% the prior month. The data adds pressure on the Bank of England to tighten monetary policy further, ahead of their latest decision today. This news was followed by the days key event from the US, the conclusion of the Feds two-day policy-setting meeting. Interest rates were increased by 50 basis points, as widely expected, a step down after delivering four consecutive 75 bps hikes but signalled more increases by the end of 2023. Additionally, Fed Chair Jerome Powell warned that borrowing costs are likely to peak at higher-than-expected levels, given that inflation is still running well above the central bank’s target range. Comments from Powell after the meeting also highlighted more evidence will need to be seen to have confidence that inflation is on a downward trajectory. GBP/USD dropped from 1.2440 to 1.2380 as the announcements started at 7pm last night. A recovery back up to 1.2440 was seen within an hour but has been on the fall since. GBP/USD currently sits at 1.2320. GBP/EUR is also softer and is trading at 1.1600 currently, after being as high as 1.1660 on Wednesday. Today is another data heavy day, as we await the Bank of England and European Central Bank latest interest rate hikes. Both central banks are also expected to tone down the size of their hikes to 50 basis points, from 75 bps last time. Any deviation from the expected announcements will add volatility to the GBP and EUR today and following comments will also be deciphered for the future path on managing inflation.

Key Movers

French consumer prices rose 0.3% on the month in November, an annual rise of 6.2%, down 0.1% from the prior month but illustrative of the sticky nature of the region’s inflation. In Germany, the Federal Statistical Office (Destatis) reports that, compared with the previous month, wholesale prices decreased by 0.9% in November 2022. The selling prices in wholesale trade were 14.9% higher in November 2022 than in November 2021. This has been released ahead of today’s European Central Bank (ECB) interest rate decision and the consensus among economists is that the ECB will hike by another 50bps. This is also expected to be followed by another 100-basis point hike within the first quarter of 2023. EUR/USD has fallen from 1.0690 seen yesterday with the USD stronger across the board overnight after announcing borrowing costs are likely to peak at higher-than-expected levels and more evidence is needed that inflation is becoming under control. GBP/EUR trades closed at 1.1600 this morning after touching 1.1660 on Wednesday.

Expected Ranges

  • GBP/USD: 1.2220 - 1.2410 ▼
  • GBP/EUR: 1.1520 - 1.1650 ▼
  • GBP/AUD: 1.8080 - 1.8250 ▲
  • EUR/USD: 1.0540 - 1.0680 ▲