Pound slips ahead of central bank decisions
Tuesday 31 January, 2023
Daily Currency UpdateThe pound has slipped a little over the past 24 hours as investors await interest rate decisions from the US Federal Reserve tomorrow night and then from the Bank of England and European Central Bank which are due at 12 pm and 1:15 pm respectively on Thursday. Market odds favor a 50bp hike from the BoE however there is a chance they may opt to go for 25bp and the Bank under the stewardship of Governor Andrew Bailey has a history of not always abiding with market expectations. There has been little economic data to start the week so it is likely we will see some risk aversion with investors seeking the safety of the dollar ahead of the three central bank announcements however dramatic moves are unlikely until the Fed's decision. In other news, the International Monetary Fund has predicted that the UK will be the only major economy in the world to slip into recession this year in its latest World Economic Outlook forecasts. It predicts that UK output will contract by 0.5% between the fourth quarter of 2022 and the end of 2023. That said the outlook for the economy is a little brighter compared to when the Bank of England produced its last quarterly forecasts in November so it will be interesting to read the Bank’s latest projections when they are unveiled at the same time as its interest rate decision later this week. GBP/USD is down to 1.2320 with GBP/EUR treading water just under 1.14.
Key MoversThe eurozone's one set of data to note today is the fourth quarter 2022 GDP numbers which are expected to show a small contraction of -0.1% for the bloc. The aforementioned IMF World Economic Outlook report expects the three major eurozone economies included Germany, France, and Italy to all avoid recession in 2023 however growth for all three will be less than 1% with Germany close to zero according to the publication. This still represents an improvement compared to many predictions late last year as the mild winter in the bloc means gas reserves remain topped up and manufacturing and industrial production has been able to continue uninterrupted. The reversal of China's zero-Covid policy has also helped improve sentiment. From the States, the only data due is the latest Conference Board Inc. Consumer Confidence survey which is expected to tick higher to 109.1 from 108.3. EUR/USD has fallen back to around 1.08
- GBP/USD: 1.2270 - 1.2415 ▼
- GBP/EUR: 1.1345 - 1.1465 ▲
- GBP/AUD: 1.7490 - 1.7650 ▲
- EUR/USD: 1.0760 - 1.0900 ▼