The Pound reached multi-week highs last week after Chancellor Jeremy Hunt did his best at calming the markets with his Spring Budget release on Wednesday.
The capturing headline that the UK will not enter a technical recession this year’, as well as expectation of growth in the years afterwards, boosted the Pound heading into what could also be a volatile week.
The Bank of England will announce the next steps forward in terms of interest rates on Thursday, as the Monetary Policy Committee meet. Catherine Mann, one of the more hawkish members of the MPC, said recently that interest rates will need to rise again to prevent inflation becoming a persistent problem in the UK. This could be the eleventh successive rate hike since December 2021 and, with interest rates currently sitting at 4%, there is an expectation that the Bank will hike by a further 25 basis points.
Inflation remains in double digits still with the last reading displaying at 10.1%. This figure has only fallen 1% in the past 5 months and the Bank’s target level is 2%. Will we see a further hike this week and, in turn, another boost to the Pound’s value?
The Bank also had it’s say on the emergency sale of Credit Suisse to UBS, as the UK has managed so far to avoid being drawn into recent bank failures. This recent crisis has seen two major US banks fold, as well as Credit Suisse. This caused a slight shock to the market as Credit Suisse is considered as one of the top 30 largest banks in the world and large enough to affect the global markets. The BoE said “The UK banking system is well capitalised and funded, and remains safe and sound.”
The European Central Bank also did not hesitate to push forward with their interest rate hike last week despite the chaos in Switzerland. The EPC pushed their interest rates to 3.5% after another 50 basis point hike on Thursday.
After two major bank collapsed in the US over the past couple of weeks, there will be plenty of eyes on the Federal Reserve’s interest rate decision on Wednesday too. As well as the EPC, the Fed are expected to hike their rates from 4.75% to 5%, the highest of these 3 central banks. The US dollar has benefited from it’s safe haven status over the past year, so the rhetoric from the Federal Open Market Committee this week will be key to the value of the greenback moving forward.
Should you have a large currency exchange to carry out and you would like to speak to us for a comparison or a discussion about where the market may head next feel free to email me directly [email protected] I look forward to speaking with you.