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UK: Weekly FX Market Update 27 March

CalendarMarch 27, 2023
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GBP

  • The Bank of England hiked rates as expected last week. The pound was relatively unimpressed

  • Some analysts suggest that the latest hike could be the last hike of the Banks hiking cycle

  • BoE Governor Bailey said that inflation was due to come down ‘sharply’ from this summer

  • UK GDP and Current Account data are released on Friday. Can the UK economy really avoid recession this year?

EUR

  • ECB President Lagarde became the most hawkish central banker last week, saying ‘We must and will’ get inflation back to 2%.

  • The markets concern over the banking system has now spread beyond the US to Europe, with rumours surrounding more than one large European giant.

  • EURUSD had been gaining on US banking concerns, but has since fallen on European bank worries and weak PMI readings.

  • Eurozone Flash CPI and GDP are released on Friday. Could inflation data take a back seat to banking liquidity concerns?

USD

  • The Fed hiked rates by 0.25% last week. Some investors think that’s the end of the US rate hike cycle.

  • Investors hoped that the Fed had managed to calm the market after the SVB collapse, however, First Republic Bank remained under pressure and the US equity markets slumped at the end of the week.

  • US Final GDP is released on Thursday, whilst Core Personal Consumption Expenditure is released on Friday. Will this refocus the Fed on inflation or will a forthcoming banking crisis dominate the markets?

Events for the week ahead:

Mon Mar 27

09:00 EUR German IFO Business Climate

Tue Mar 28

01:30 AUD Retail Sales

13:30 USD Goods Trade Balance

15:00 USD Consumer Confidence

Wed Mar 29

01:30 AUD CPI

12:00 GBP Financial Policy Committee Minutes/Statement

Thurs Mar 30

07:00 EUR German Retail Sales

07:00 EUR German Prelim CPI

09:00 EUR ECB Economic Bulletin

13:30 USD Unemployment Claims/Final GDP

Fri Mar 31

07:00 GBP Current Account/Final GDP/Revised Business Investment

10:00 EUR CPI Flash estimate/Prelim Flash GDP

13:30 CAD GDP

13:30 USD Core PCE

15:00 Revised UoM Consumer Sentiment/Inflation Expectations

Author

Trevor Charsley

Trevor Charsley

Senior Market Strategist

Trevor has over 25 years' trading and sales experience. He produces regular market and technical analysis as well as help with the structure and management of FX hedging policies. Trevor is often listed among the top "currency forecaster on Bloomberg".

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