• GBP has the best day since February 14th, gaining across the day on reports of an imminent trade deal between the UK and EU. Rishi Sunak will be in Northern Ireland today looking to get backing from fellow MPs.
• The USD gave up some gains from Friday’s core PCE inflation numbers, mainly down to month-end flows and a rise in equities, but nonetheless remains on course to finish February higher. This will be the first monthly gain since September.
• Inflation in France soars to a record of 7.2% higher than a year ago versus an expected print of 7%.
The GBPEUR uptrend off the 6th February lows continues after the pair posted a new higher high from a charts perspective. Renewed optimism of the UK economy seems to be the driving factor for now, as well as some unwinding of the optimism in the eurozone. However, it’s worth noting this morning’s higher than expected French inflation numbers has caused some early EUR buying. Markets have consequently priced peak interest rates in the ECB at 3.85%.
The USD remains the key driver in markets, and the monthly performance on the USD index will likely dictate how markets perform next month. The narrative of elevated inflation causing the Fed to keep rates higher for longer is continuing to add to USD demand, and a month-end finish on the USD index above the high in January would indicate more gains to come.
Equals Money Market Analysis– 28th February 2023
Today’s Market Rates
Today’s Interbank Rates at 09:27 am against sterling movement.
GBP>EUR – 1.1384
GBP>USD – 1.2087
EUR>USD – 1.0551
GBP>CAD – 1.6429
GBP>AUD – 1.7985
GBP>SEK – 12.583
GBP>AED – 4.3971
GBP>HKD – 9.4890
GBP>ZAR – 22.278
GBP>CHF – 1.1331
This month really has been all about USD, following a string of strong data points suggesting the economy is stronger than what was expected following those job numbers at the start of the month – not to mention data showing that consumer spending remains strong alongside inflationary pressures.
As a result, over the course of the month, markets have gone from pricing interest rates cuts this year to an expectation that interest rates will go higher than what was projected and stay there for longer. We watch how USD demand continues today, with focus being on a close near the peak in January on the USD index to indicate more USD buying to come going into next month’s Fed meeting.
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