Interest rate decisions


The end of last week’s trading did not end well for the Sterling-Euro rate, with the currency pair falling to fresh 3-week low points. On the Brightside, the rate has propelled itself upwards so far in trading today, erasing a large chunk of its previous losses. With it being a quiet day for both the UK and Eurozone regarding economic data, it is unclear how much steam the Pounds recent upwards movement has left. Looking ahead, trading this week will likely be dominated by the European Central Bank’s interest rate decision that is due to be announced on Thursday. The Euro will be heavily impacted by this decision according to whether hawkish markets will find satisfaction in the approach that the ECB adopts. As it currently stands, Eurozone inflation is standing at a record high of 8.1% with markets anticipating a 0.65% increase in interest rates. This decision may also have an indirect impact on the Pound through knock-on implications for the BoE’s interest rate stance for their June 16th decision.


The last two weeks we have seen the rate steadily climb to 5-week highs, but this has since been cut short following intense losses we saw at the end of last week. This came as the Dollar regained some of its lost strength and clawed back at the Pound. To kick off trading this week, the rate has been rather stagnant with it only printing some minimal gains so far. Currently, the Pounds upwards movement is being significantly limited as the Dollar draws strength from the market outlook for their Federal Reserve. The U.S. economy, like many others, is still battling with record breaking inflation but, to the Dollars benefit, markets are continuing to look at the Fed to deliver a range of interest rate rises throughout the year. The Pound on the other hand has previously struggled regarding interest rate rises as the Bank of England opted to take a more dovish approach to the situation as they want to limit the current cost of living crisis in the UK. For trading today, the economic calendar is particularly quiet for both sides of the table meaning that the rate will mainly be influenced by the overall market sentiment. Looking at the end of the week, crucial inflationary data will be released in the US but until then the rate may not see much movement.

Morning Update published by Frank Brightman (06/06/2022)

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