Last week we saw Pound Sterling exchange rates fall following the Bank of England decision to raise interest rates by 25bps to 0.75%. Members voted 8-1 in favor of the hike and signaled that there will be fewer hikes this year than initially priced in by the market (Not really surprising) but this caused GBP to fall by around 1% after the decision.

Traders have been pricing in very hawkish meetings for Central Banks and the BoE have done the right thing by giving their forward guidance that it may not be as hawkish as some may think, of course, inflation remains an issue and 0.75% is not enough to tackle it, but at least they have made a start. The reason for the cautiousness from the BoE was largely due to the ongoing situation between Russia & Ukraine- which will undoubtedly have an impact on inflation, especially related to energy and food.

With that being said- expectations for Sterling have now changed, and the analysts that were looking for 1.22 + on GBPEUR are now settling for 1.18/1.19- which right now looks accurate. The reality is we are going to see an economic slowdown in the UK, and when we begin to see this in the numbers, it will affect the exchange rates- so this is worth keeping in mind if you have purchases over the next 12 months to make.

The Fed also raised rates last week, as expected- and we did not see much movement on the back of this- GBPUSD is still trading a lot lower due to investors looking for a safe haven- the exchange rate is not really expected to resolve higher until we begin to see the war calm down- until then GBPUSD is expected to stay in the 1.30-1.32 area.

This week we will still be at the mercy of the headlines- but as far as data releases are concerned- I would say that Fed Chair Powells speech on Monday will be one to watch, UK inflation figures on Wednesday (Expected to come out at 4.8%) and UK PMI numbers out on Thursday coupled with Retail sales on Friday. This week will be important for Sterling exchange rates- as ever, if you require any guidance, please don’t hesitate to contact me.