It has been an incredibly volatile week- predominantly for GBPUSD and EURUSD pairs, with Cable falling to lows of 1.24 and EURUSD falling to 1.04 following massive Dollar strength. This has now put Sterling exchange rates in a strange position going into the new month- with plenty on the docket for this week, let’s take a look at what is expected for prices.
The first major event will be the Fed’s interest rate decision on Wednesday- the expectation is a 50 bps hike bringing interest rates up to 1%- inflation is running rampant in the U.S and major intervention is needed by the central banks- so far stocks have been suffering due to this upcoming decision, but as long as we don’t see any shocks on Wednesday (I.e a 75 bps hike) we could get a relief rally on stocks and potentially GBPUSD to trade slightly higher afterward- traders have sold the rumor so maybe they will buy the news. Following the hike, the press conference will be one to watch to see what forward guidance will be given by Fed Chair Powell- what other hikes are expected this year, and how hawkish the Fed is expected to be.
On Thursday, the Bank of England will have their interest rate decision- again, the expectation is a hike, however, it is 25bps that is priced in for this month. Many traders are looking at a 50 bps hike as it seems the smaller rate hikes are not really tackling inflation in a meaningful way at all and this would be incredibly bullish for Sterling, and a 25bps hike could see the Pound fall a little. It is expected after this hike that the BoE will turn a little dovish so as to not disturb the economy too much.
These are the two main events this week- once we have had these releases we will then be able to determine how the rest of the month looks- if you have any upcoming transactions and would like some assistance please don’t hesitate to contact me.
I will be out of the office from Thursday 5th to Monday 9th May- please contact jason.clarke@currencies4you.com in my absence.