GBP lost further ground against the EUR and USD yesterday and over the last week has registered a 1.6% decline against the euro and a 0.86% fall coming against the USD. GBP currently trades at 1.3075 against the USD, the lowest level since November 2020.
This is despite the upbeat data releases from the UK, which shows the UK economy grew by 0.8%, surpassing market expectation of 0.2% and industrial production expanded by 0.7%. This data reaffirms expectations that the Bank of England will go ahead and hike interest rates at the upcoming meeting on the 17th March.
The ECB helped the Euro higher after it said it was ready to end its quantitative easing programme in the third quarter of 2022 in what amounts to a more ‘hawkish’ signal from the central bank. Markets were wary the ECB would strike a more cautious tone given the current geopolitical situation in Ukraine, but the ECB appears concerned that inflation is at risk of anchoring above their long-term target.
Across the pond markets now expect up to 160 basis points worth of rate hike from the Federal reserve in 2022 after the USD reported core inflation rose to 6.4% in February, ahead of estimates for 5.9%.
Have a great weekend.
Joseph Sidders, Relationship Manager.
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