Currency Note

Sterling reaches two-week high against euro

By Alex Bennett March 22nd, 2022

The classic Florida villa, now $50,000 more than last year and worrying buyers and bankers

The pound has been climbing steadily since last week when the Bank of England’s split decision (1 to 8) on raising interest rates sent the markets into a tail spin.

Against the US dollar things have been a little more patchy, ultimately ending in sterling declining by around 0.2% from where it started the working week.

With the war in Ukraine approaching its fifth week, a lack of progress in either military victory for Russia, peace talks or further damaging sanctions is allowing other factors to drive exchange rates. That may include the Spring Budget tomorrow. The Chancellor will have noted Public Sector Borrowing this morning reaching £13.1bn for February, far worse than expectations.

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GBP: Inflation and Budget could prompt market movement

With the pound recovering against the euro but equivocal against the US dollar (indeed, all of its major dollar rivals), market movement is likely tomorrow when the inflation figures for February are released.

The likelihood appears to be that inflation will exceed 6%, with the Retail Price Index exceeding 8%. It is against this background that the Chancellor Rishi Sunak must stand in the House of Commons to deliver his Budget.

Watch out, too, for Markit PMI on Thursday morning, Gfk Consumer Confidence and retail sales data on Friday.

GBP/USD past year

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EUR: Euro weakens in quiet period for data

The euro weakened against both US dollar and pound sterling yesterday and early this morning. Indeed it has fallen steadily against most of its major rivals apart from the Japanese yen over the past week.

It’s been a quiet period for data, with no major data releases yet this week, but coming over the horizon is Markit PMI on Thursday. In the meantime there have been various speeches by European Central Bank interest rate setters ahead of the ECB Economic Bulletin on Thursday.

USD: Dollar strengthens across the board

The dollar had a positive day yesterday, strengthening against all of its major rivals by as much as 0.7% and recovering from the losses it made around the Fed’s interest rate decision last week.

On that subject, several Federal Reserve board members will be making speeches, including Daly, Williams and Mester today.

Tomorrow there will be new home sales, which haven’t met expectations in recent months, possibly due to the significant price rises that have seen the average home price rise by $50,000 in the past year to $423,000.

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