Currency Note

BoE’s hawkish turn strengthens pound

By Alex Bennett March 24th, 2023

Sterling turned another corner yesterday after an up-and-down sort of week.

GBP/USD ends the week close to its highest levels since last spring. Less positively against the euro, it hit a two-week low early yesterday but has been climbing since.

The Bank of England’s decision to raise interest rates by 0.25% to 4.25%, by a margin on the Monetary Policy Committee (MPC) of seven to two, was more decisive than the markets had expected and strengthened the pound against the dollar.

That has been followed this morning by positive retail sales data and a Consumer Confidence reading that was at least no worse than expected.

The rate rise was praised by chancellor Jeremy Hunt. However, other voices have been more critical, including David Blanchflower, former member of the MPC during the last banking crisis, who said the rate rise was a disastrous decision with banking already in turmoil, and that rates should be cut to 3%.

Switzerland’s central bank also raised interest rates, from 1% to 1.5%, despite the recent problems for Credit Suisse.

Following on from defeating Tory Eurosceptics with the passing of the Windsor Framework this week, Rishi Sunak is said to be looking to build the relationship with the EU, especially in relation to trade.

Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Business Trader on 020 3918 7255 to get started.

GBP: Retail sales surge in February

Sterling powered ahead against the US dollar yesterday while remaining broadly static against the euro. This morning’s data on consumer confidence and – more importantly – spending has boosted sterling further.

The Gfk Consumer Confidence level improved slightly but is still firmly negative, while retail sales were revealed this morning to have surged in February, by 1.2% since the previous month.

Next week starts relatively quietly for data.

GBP/USD past year

From To


EUR: Yesterday’s losses can’t mask good week for euro

It’s been a positive week for the single currency on the whole, strengthening against most major currencies except for the Norwegian krone, and including a roughly 0.75% rise against sterling overall. However, that was despite dropping across the board yesterday.

Next week’s data starts with Ifo Business Climate for Germany, but only really gets into its swing midweek with preliminary inflation data.

USD: Dollar rises at tail end of poor week

The US dollar strengthened against most major currencies by between 0.5 and 1% yesterday, but not sufficiently to recover the losses from earlier in the week and it hits Friday some 1.5% adrift of EUR compared to last Friday.

It was a quiet day for data, but the Kansas Fed’s Manufacturing Index showed strong growth of 3, its best level since July.

We will shortly be hearing about US Durable Goods Orders, with a strong improvement on last month’s -4.5% expected. There is little to get excited about in the early part of next week, but things liven up a little on Friday with Personal Income readings.

For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business trader on 020 3918 7255 or your Private Client trader on 020 7898 0541.