Currency Note

BoE and Fed to unveil interest-rate decisions this week

By Sharyh Murray-Francis March 20th, 2023

BoE to decide on the UK's interest rate this Thursday.

The pound enters the week stronger against the euro and US dollar compared to this time last Monday, with gains of approximately 1.35% and 0.77% respectively.

According to 10th World Happiness Report, the Covid 19 pandemic has not affected humankind’s happiness. Researchers interviewed over 100,000 people from 137 countries and found “significantly higher levels of benevolence in all global regions” than before the pandemic.

Some of the top 20 countries ranked by happiness include Sweden at number 5 , New Zealand at number 10 and Finland at number 1 with a score of 7.80.

Investors will have plenty economic releases to digest over the course of this week. We’ve just seen Germany’s latest PPI for February which revealed that producer price inflation eased to its lowest level in 17 months to 15.8% amid softer rises in energy prices.

This was slightly above market forecasts of 14.5% and marked the fifth consecutive month of declines.

At 4pm today the ECB’s President Christine Lagarde will speak and tomorrow, market watchers will see the latest ZEW economic sentiment index from Germany.

This week will be a busy one for pound-watchers, with the UK’s inflation rate out on Wednesday, followed by the Bank of England’s interest decision on Thursday.

For US dollar-watchers, there will be several key releases this week however, all eyes will be on the Federal Reserve for its interest decision on Wednesday.

In the stock markets, European equities headed for a lower open on Monday following recent concerns over the global financial system.

Over the weekend, the international criminal court (ICC) issued an arrest warrant for President Vladimir Putin over alleged war crimes, including the ‘unlawful deportation’ of Ukrainian children.

Ukraine’s President, Volodymyr Zelenskiy estimated that the number of deported children exceeded 16,000 and said that the warrants for Putin’s arrest represented “an historic decision which will lead to historical accountability”.

Many will be keeping a close eye on how this week’s political and economic events unfold, and most importantly,  if they will trigger further volatility within the currency markets.

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GBP: Markets anticipate 25bp BoE rate hike

In its February meeting, the Bank of England‘s monetary policy committee voted by a majority of 7-2 to hike interest rates by 50bps to 4%. This pushed the UK’s borrowing costs to their highest in over a decade.

Economists predict that on Thursday, the Bank will decide on a 25bp hike to 4.25% in order to tame high inflation.

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EUR: ECB’s President Lagarde to speak

European Central Bank President, Lagarde, will speak on Tuesday at the Bank of International Settlement Innovation Summit. Lagarde is scheduled to participate in a panel discussion titled “CBDCs: Keeping momentum in uncertain times”.

Investors will be listening out for any hawkish comments which could help to boost the euro.

USD: All eyes look to the US Federal Reserve

On Wednesday, the US Federal Reserve will decide on its latest interest rate and release its latest economic projections. Similar to the BoE, markets are expecting a 25bp rate hike from the Fed.

If the rate increases in line with market expectations this could please markets and in help to boost the US dollar against its rivals.

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