GBP/USD
The Pound nosedive continues, with the rate now sitting all the way down at its lowest level since June 2020. This comes as the Pound has been hit by a hefty amount of setbacks, most notably the Bank of England announcements last Thursday. In this they gave their plans to tackle the current inflation surge in the UK, with them announcing an interest rate hike of 0.25% to an overall figure of 1%. The immediate knee-jerk reaction by the Pound from this was a slight decline but losses were greatly increased following the BoE’s next announcement. In this, the BoE slashed their UK growth expectations and said they expect inflation to reach a staggering figure of 10% before year-end. This evidently did not settle well with investors, with a strong selling flurry pushing the Pound down against many of its counterparts. As for the Dollar, it also had to deal with its own negative forces following their slightly underwhelming interest rate decision last week, but the Greenback has since regained strength and clawed back its losses against the Pound. The quick recovery by the Dollar was mainly down to the strong demand for the currency, quickly uplifting it. As for economic news, the start of this week is rather quiet meaning that the rate will likely focus on overall market sentiment until the important US inflation data release on Wednesday.
GBP/EUR
Currently, the Pound is also doing no better against the Euro, with the rate sitting on par with the lowest levels seen since December last year. The main reason for this recent poor performance by the Pound is predominantly down to the recent downturn in economic data releases, failing to meet consensus. Last week sentiment for sterling took another hit as the Bank of England announced their growth forecasts for the UK economy. In this they forecasted the economy to shrink in 2023, with inflation expected to reach 10% by the end of this year. With inflation expected to reach this eye watering level, markets are already looking at the BoE to raise interest rates to 2.5% by 2023. As for the Euro, data releases from Germany have taken a slight toll on the currency as figures failed to meet consensus but this has largely been recovered. The Euro is also finding a slight degree of support as markets look at the ECB to start interest rate hiking, with many predicting their first hike in July. As for today it is likely that the rate will remain quite stagnant, with no important data releases expected from either side.
Morning Update published by Frank Brightman (09/05/2022)