Market Update 21st March – 25th March

Where you will be able to keep up to date with all the latest changes in the currency market

GBP

Sterling appeared to gain momentum towards the back end of last week against both USD and EUR but failed to sustain any significant movements coming into the new week, despite the Bank of England raising their interest rates by 25bps to 0.75%. The BoE placed a question mark over the outlook for multiple rate hikes throughout the rest of the year and suggested that surging energy prices alongside increasing inflation could put a squeeze on incomes. This could ultimately serve as a substitute for increases in interest rates during the period ahead. As we look to the week ahead, the highlight will be Wednesday’s participation by Governor Andrew Bailey in a panel discussion at the Bank for International Settlements Innovation Summit. Otherwise, we have Inflation figures out on Wednesday which may give an indication into future rate hikes from the BoE.

EUR

As the war continues to rage across Ukraine, the Euro has surprisingly regained some momentum after it was hit heavily at the start of the month. The initial scare of the war proved disastrous for the single currency with the GBP/EUR rate hitting a 5-year high and the EUR/USD rate hitting a 2-year low. Since then, it has recouped over 2% of its losses against both major currencies and the trend continues into the new week, after peace talks between both countries seem to be progressing. The Euro is likely to pay close attention to the latest IHS Market PMI surveys on Thursday, alongside a multitude of speeches from ECB board members this week, starting today with Christine Lagarde. Otherwise, investors will be keeping a close eye on developments in Ukraine.

USD

Considering the Dollar was the best performing currency throughout the first half of March, primarily due to the ongoing Russian invasion of Ukraine, it has since lost some of its gains after Russia and Ukraine made significant progress on a peace plan. The plan included a ceasefire and Russian withdrawal if Kyiv declares neutrality and accepts limits on its armed forces. Because of this, global investor sentiment seemed to relax last week with the stock markets back in the green. Although we saw the Federal Reserve raise their rates by 25bps last week to 0.5%, it seemed to have minimal impact on the Dollar, with many analysts saying this rate hike was already heavily priced into the market. As we look to the week ahead, the highlight for USD will come from Jerome Powell’s speech on Monday regarding the economic outlook, followed by a panel discussion on Wednesday. Investors will be keeping a close eye on future rate hike suggestions as last week’s hike was the first since before the pandemic.