Key points & Recap:
• EURUSD hits 12-month highs
• GBPUSD hits new 10-month highs
• Bank earnings in focus today
We saw the USD continue to lose ground after the core PPI inflation came in worse than expected at -0.1% for the month of March, taking both GBPUSD and EURUSD to new 10-month and 12-month highs respectively.
GBP in general had a less than impressive day, as can be seen in the data below following the worse than expected GDP, industrial, and manufacturing production figures earlier in the morning.
The ECB hawks were out in force yesterday with Scicluna, Holzmann, and Kazaks all seeing scope for a hike of either 0.25% or 0.50% in May. Markets currently price in a 20% chance of a 0.50% hike in the ECB’s May meeting.
The running theme in FX continues to be that of a weaker USD, with diverging monetary policies between central banks being one of the notable drivers. Two sets of declining inflation figures from the US this week now firmly sets in 50 bps worth of rate cut expectations by the Fed, and it seems going into the Fed meeting in May, we could well see this trend on USD weakening continue. Today sees the release of US retail sales and consumer sentiment as well as the release of 1st quarter earnings from US banks. Given the recent troubles in the banking sector, these earnings will be closely looked at to gauge risk appetite in the markets, which in turn would have an implication on additional gains on GBPUSD and EURUSD pairs.
What a journey for EURUSD over the last 7 months. Back in September we were below parity with fears of the pair declining further. Now the story is somewhat different with the pair back at 12-month highs. Several factors have contributed to this, with gas prices declining, the China reopening story, and the diverging monetary policy between the Fed and the ECB. Currently markets price in approximately 50 bps worth of rate cuts by year-end by the Fed, and approximately 70 bps worth of hikes by the ECB, taking EURUSD up to 12-month highs.
Equals Market Analysis– 14th April 2023
Today’s Market Rates
Today’s Interbank Rates at 09:36 am against GBP movement.
GBP>EUR – 1.1314
GBP>USD – 1.2513
EUR>USD – 1.1061
GBP>CAD – 1.6675
GBP>AUD – 1.8484
GBP>SEK – 12.832
GBP>AED – 4.5952
GBP>HKD – 9.8240
GBP>ZAR – 22.655
GBP>CHF – 1.1112
· 12:30 USD Retail Sales (MoM)(Mar)
· 12:3 USD Retail Sales Control Group(Mar)
· 14:00 USD Michigan Consumer Sentiment Index(Apr)
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