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FED decision anticipated

Daily Currency Update

There has been evidence of continued inflationary pressure this morning after the latest UK figures. Consumer prices rose 1.1% on the month in February, up to 10.4% on an annual basis and missing the forecast at 9.9%. The biggest contributor to the rise was housing, household service, food, and drink. The Bank of England is due to meet on Thursday and is expected to raise interest rates by another 25 basis points to 4.25%. Governor Andrew Bailey has signalled he may be prepared to pause rate increases, but the latest inflation figures may force his hand to continue with the expected rise. GBP/USD had eased back down to 1.2190 yesterday after banking concerns eased and ahead of the FED interest rate announcement. Since this low, GBP/USD has picked back up and is currently testing 1.2300 following the inflation figures. GBP/EUR has seen a similar moving pattern but in a much narrower range, going from 1.1310 to testing 1.1400 again this morning.

The Federal Reserve is due to deliver its interest rate decision later today, with a 25-basis point hike to 5% that could be expected. This will be the main focus for currency movement today ahead of interest rate decisions from Switzerland and the UK tomorrow.

Key Movers

Market sentiment has improved over this week after concerns ease on the recent banking crises. It started this weekend when troubled lender Credit Suisse was rescued by UBS, a deal that was brokered and supported by the Swiss government. Nerves were soothed further yesterday when US treasury secretary Janet Yellen said she was prepared to intervene to protect depositors in smaller banks. The news comes ahead of the Federal Reserve interest rate decision where it is still widely expected they will raise the interest rate by 25 basis points. However, there is still great uncertainty over future monetary policy decisions given inflation remains elevated but also concerns over the stability of the banking system could limit the central bank’s hawkish stance. EUR/USD recently fell down to 1.0530 but is now testing 1.0800.

Expected Ranges

  • GBP/USD: 1.2050 - 1.2410 ▲
  • GBP/EUR: 1.1320 - 1.1460 ▲
  • GBP/AUD: 1.8190 - 1.8580 ▲
  • EUR/USD: 1.0600 - 1.0910 ▲