Currency Note

All eyes on the European Central Bank

By Sharyh Murray-Francis May 4th, 2023

ECB to decide on its latest interest rate this afternoon.

Sterling enters the day stronger against the euro and US dollar compared to yesterday. The pound has also made gains of well over half a percent against both rivals, respectively, compared to this time last week.

This morning is a busy one for UK data with a variety of economic releases rolling out. One to watch will be the Bank of England’s consumer credit figures for March, which will be released at 9:30 this morning.

The euro enters the day nearly half a percent stronger than the US dollar compared to this time yesterday, after gaining close to one per cent over the course of Wednesday. The EUR/USD rally followed growing anticipation for the Federal Reserve’s interest rate decision. Read on for the results.

All eyes will turn to the European Central Bank (ECB) at lunchtime today. The ECB is expected to raise interest rates by 25 basis points to tame inflation.

This morning, and ahead of the ECB’s announcement, European equity markets headed for a muted open as investors cautiously awaited the ECB’s policy decision.

On the data front, Germany’s trade surplus increased to €16.7bn in March 2023. This was up from €16bn in the previous month and exceeded market expectations of a €16.1bn rise. It was the largest trade surplus in over two years as the country’s exports fell less than imports.

At lunchtime, investors will have more balance of trade data to digest, this time from Canada and the US.

Tomorrow is another big data day for the US, as Nonfarm payrolls and the country’s unemployment rate are both scheduled for release at lunchtime.

Tomorrow, Italy’s retail sales will give markets a picture on the country’s economic activity.

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GBP: Up next, more mortgage data

The Bank of England is set to release mortgage lending and mortgage approvals data at 9:30 this morning. In the previous data release, mortgage approvals for house purchases in the UK increased to 43,500 in February 2023.

Despite increasing, this still pointed to the lowest rate since the early stage of the pandemic and was one of the weakest figures since January 2009.

From To


EUR: Eurozone unemployment hits lowest rate on record

The latest unemployment rate for the eurozone hit its lowest levels since records began nearly 30 years ago.

Wednesday’s data revealed that the number of unemployed people in the eurozone fell by 121,000 from a month earlier to 11.010 million.

USD: Fed hike rates as expected

At 7pm yesterday, the US Federal Reserve hiked America’s interest rate by 25 basis points, to 5.25%. The decision was in line with what markets had already priced in and marked the Fed’s tenth increase, pushing borrowing costs to their highest level in over ten years.

Many will be watching to see how the dollar performs against its rivals over the coming days following the Fed’s decision.

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