Currency Note

Pound seems unphased by BoE governor’s comments yesterday

By Sharyh Murray-Francis March 2nd, 2023

With the pound under pressure, sterling-watchers will be keeping a close eye over the coming days for the currency’s response to Bailey's Hawkish comments.

Investors listened closely as BoE governor Andrew Bailey delivered a speech at the Cost of Living Crisis Conference in London yesterday. Bailey touched on a number of inflation-related issues including monitoring the Bank’s current tightening, interest rates and the condition of the UK’s labour market.

Hawkish comments from Bailey did not seem to boost an already pressured sterling however, pound-watchers will be keeping a close eye over the coming days for the currency’s response.

It was a good day for equities in London yesterday. The benchmark FTSE 100 stocks finished above the 7,900 mark with gains largely driven by advances in the materials and energy sectors. Investors also welcomed data from China which pointed to signs of economic recovery and contributed to bullish bets on the FTSE 100.

Key eurozone economies continue to churn out the inflation data this week. On Wednesday, markets saw Germany’s preliminary monthly and yearly figures which both rose above expectations (8.7% and 0.8%).

France and Spain’s inflation rates also rose earlier this week.

In the US, the Institute for Supply Management released their latest purchasing manager’s index on Wednesday. The index edged higher to 47.7 in February, following a fall to 47.4 in January, however it fell short of expectations of 48.

Spot on PMI results, or those above forecasts usually please currency markets, so dollar-watchers will be keeping a close eye on how the weaker-than-expected data impacts the dollar’s movements over the coming days.

Stocks in the US hit a 5-week low on Wednesday with the US500 decreasing to 3943. On the other hand, Stocks of crude oil in the US rose by 1.166m barrels to 851.8m in the week ended February 24th. This pointed to the highest level since September.

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GBP: Sterling suffered yesterday

Sterling fell under pressure against the euro and the US dollar yesterday as investors digested a range of market-moving economic releases. This morning, the pound is still weaker than both the euro and the US dollar compared to this time last week, as well as this time last month.

The pound is also weaker than the chinese yuan renminbi on a weekly footing however, it remains strong against the japanese yen and canadian dollar.

GBP/USD over the past year

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EUR: More inflation data from eurozone economies

Inflation data plus a flurry other key economic releases yesterday saw the euro rally against sterling.

This morning the euro boasts its weekly gains against both the pound and US dollar. The single currency has also made fresh weekly gains against a handful of its other rivals, including the aussie dollar, swiss franc and canadian dollar.

USD: All eyes on US dollar following PMI

The US dollar made weekly and monthly gains against the pound yesterday but was weaker against the euro following the euro area’s hot inflation data. This morning the dollar is up, maintaining yesterday’s gains (as well as monthly gains) against the pound and the euro.

Investors will be keeping a close eye on the dollar to see how it responds to the latest PMI data.

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