Market Reports : 03.05.23

Published: 03/05/2023 By ECAP

Sterling rebounded against the Dollar after the bank holiday dip following the market open this morning. This bout of strength could be short lived however ahead of the highly anticipated US FED’s rate hike meeting this afternoon. A quiet week of data for the UK, all eyes are on the ECB and FED’s rate hike announcements and how this will impact the pound. The UK is expecting the next BoE monetary policy meeting on the 11th May to see a 25-basis point rate increase to 4.5% with predictions it could even reach 5% by August, which could see GBP break pre-covid levels.

The Euro continues to be volatile as markets await multiple economic data releases throughout the week. With the European Central Bank delivering its next interest rate decision tomorrow and analysts predicting a 25-basis point increase, there could be a spat of volatility to come. EURUSD levels are potentially expected to break new highs which we haven’t seen since April 2022.

With a busy week for the US data, including US employment numbers and the FEDs interest rate decision, the markets anxiously wait to see if this will be the final interest rate hike from the FED from their 18-month hawkish stance. General market consensus is hinting at a pause from the Fed as they seem to believe they “are in control and tackling inflation” – therefore, not requiring any further interest rate hikes (causing the current weakness). However, if they do surprise the markets and continue to hike with a hawkish stance, we could see USD strengthen.