Currency Note

Pound weaker as UK economic growth slows

By Alex Bennett April 11th, 2022

The pound is weaker against the euro and the dollar this morning. GDP figures were released for the UK, showing that economic growth was slower-than-expected in February, mainly driven by a drop of activity in the manufacturing sector.

The markets will look ahead to inflation figures, which are due to be released for both the UK and US this week. Whilst inflation is expected to go up for both countries, any surprise figures could impact the pound and the dollar.

The euro has been given a boost this morning following news that Emmanuel Macron has taken the lead in the French Presidential elections. The first round took place yesterday, with Macron and Marine Le Pen emerging as the front runners. The second round will take place on April 24.

The European Central Bank will release its latest decision on interest rates this Thursday. Any comments from officials surrounding monetary policy and the impact of the war in Ukraine on the European economy could affect the euro.

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GBP: UK inflation figures due this week

The pound is slightly weaker against the euro and the dollar this morning, mainly due to strength from the single currency and the greenback.

A series of economic data was released for the UK this morning. GDP figures showed that the UK economy slowed more than expected in February, growing 0.1% month-on-month. This was lower than expectations of a 0.3% rise and January’s figure of 0.8%.

Whilst the service sector was the main contributor to growth, this was offset by a drop of activity in the production sector, particularly in manufacturing.

The markets will be looking to unemployment figures tomorrow and inflation data on Wednesday. Inflation is expected to have reached 6.7% in March; however, any surprises could impact the pound.

GBP/USD chart over past year

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EUR: Macron lead boosts euro

The euro has received a brief boost this morning following the first round of the French Presidential election. Emmanuel Macron has the lead against Marine Le Pen and the two will go head-to-head in the final round in a couple of weeks.

However, the French elections are famously unpredictable, so anything could happen in the final round. Macron was ahead with 28% of the vote after the first round, with Le Pen following at 23%.

Tomorrow, inflation data for Germany will be released, followed by economic sentiment figures for both Germany and the eurozone. On Thursday, the European Central Bank will release its latest decision on interest rates and the markets will be listening for any change in approach to monetary policy.

USD: US inflation figures due tomorrow

The dollar is strong against a basket of currencies this morning, driven by high inflation and the Federal Reserve’s intention to tighten monetary policy quickly.

Last week, minutes from the Federal Reserve’s March meeting, as well as comments from policymakers, revealed that the Fed could move even faster with scaling back monetary policy than initially expected.

This week, US inflation figures for March will be released, expected to rise to 8.5% year-on-year. Retail sales and consumer sentiment figures will be released Thursday, whilst a series of Federal Reserve officials will speak throughout the week.

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