US interest rate hikes still likely
Monday 17 April, 2023
Daily Currency UpdateData on Friday showed US retail sales slowed sharply in March with sales falling 1%, more than the 0.4% decline economists forecast. Consumer sentiment from the US followed the retail sales figures and painted a slightly pretty picture beating the previous forecast of 62.0 and coming in at 63.5. However, hawkish comments from FOMC member Christopher Waller moved the USD as he called for rates to rise further despite US inflation retreating. His comments pushed up expectations that the Fed will hike rates in May and cast doubts over whether a pause in future hikes was imminent. GBP/USD had fallen shy of 1.2550 ahead of the comments on Friday and has since fallen below 1.2400. EUR/USD has similarly dropped from fresh highs, touching 1.1075 Friday morning but now back under 1.1000.
Today’s headlines will come from the US in the form of the Empire State manufacturing index and Europe with ECB President Lagarde speaking at the Council of foreign relations, in New York. Tomorrow, UK claimant count change and average earnings is being released, ahead of the consumer price index on Wednesday as market participants await the latest inflation figure. There is an abundance of macroeconomic data this week, which is only likely to continue the recent volatility seen between GBP, EUR, and USD.
Key MoversFriday’s FOMC member Christopher Waller’s comments have certainly hit market participants' risk appetite. Calling for further interest rate hikes in the US has driven up the expectation of a rate hike in May and driven down a pause in future hikes. The USD lost ground against the GBP and EUR last week, with GBP/USD starting the week at 1.2350 before touching 1.2445 on Friday and EUR/USD at 1.0830 before touching 1.1075 over the same time span. Global concerns over further hikes from the US have seen the USD once again bought as a safe haven currency and a sell-off in riskier assets like the AUD has been seen. There is a great deal of key macroeconomic data this week and market participants will continue to search for clues as to what decisions the central bank will make in their upcoming meetings.
- GBP/USD: 1.2280 - 1.2460 ▼
- GBP/EUR: 1.1210 - 1.1350 ▼
- GBP/AUD: 1.8390 - 1.8620 ▲
- EUR/USD: 1.0920 - 1.1000 ▼