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Markets await US growth data

Daily Currency Update

GBP/USD made another move to take the 1.25 level again yesterday, briefly trading above it before falling back. It was the fourth time this month it has managed to get above the psychological figure before it has pared it gains. The move was prompted by some dollar weakness in the markets rather than any domestic data of note. With markets expecting three more interest rate hikes from the Bank of England, compared to one from the Federal Reserve and an economy performing much better than many would have thought a few months ago the pound has rallied over recent weeks. The moves versus the euro have been far more limited however as its gains versus the dollar has the net effect of meaning GBP/EUR has slipped back a touch in the same timeframe. Today and for the rest of the week there is little data from the UK so market sentiment and external factors will be the main driver of the pound. GBP/USD is back down to 1.2460 with GBP/EUR down to 1.1290.

Key Movers

As mentioned earlier some dollar weakness was seen throughout Wednesday despite US data outperforming market expectations. Durable Goods Orders including the core component (which strips out car sales) beat predictions for March. We also saw a better than expected trade balance figure for March also. Next weeks interest rate decisions from the US Federal Reserve and the European Central Bank is likely the markets primary area of focus with the potential for a narrowing in the spread of interest rates between the banks. A hike of 25bp is expected from the Fed with the door still open to 50 from the ECB. The Fed may choose to pause its hiking cycle after May 3rd but like the BoE the ECB is expected to carry on raising rates throughout the summer. We could see some market movement today on the back of the first estimate of US growth for Q1 2023. That is due at lunchtime and is expected to show that the economy grew at an annualised pace of 2%, a slowdown from 2.6% seen in Q4 2022. EUR/USD got as high as 1.1095 yesterday however the dollar has recouped some losses and the pair now trade at 1.1050.

Expected Ranges

  • GBP/USD: 1.2390 - 1.2535 ▼
  • GBP/EUR: 1.1200 - 1.1320 ▼
  • GBP/AUD: 1.8745 - 1.8910 ▼
  • EUR/USD: 1.0975 - 1.1120 ▼