19/03/2024 – Exchange Rates

Recent market speculation is that Bank of England shows signals of a potential rate cut happening in the late summer. While macro economists and strategists are predicting a bluntly different scenario, seeing long positions on GBP strengthen – which if markets place into its hands will boost the GBP in the long run. Even if we historically see GBP in lower territory it is the second best performer so far in 2024. Currently telling us that anyone’s guess is as good as the other? With Bank of England coming out very hawkish (confident) at their last meeting any change of tone/indications at their next meeting could have a negative impact on GBP pairs.

The early session (Asian opening) saw a rate hike from Japan leaving negative territory to a base rate of 0%. Markets were not too surprised and have absorb the hike since 2007. Japan has struggle with deflation, and since 2016 rates entered a negative region to encourage banks to lend for increased consumption. Moving forward it will be of interest to keep an eye on currency pairs related to JPY and also the forward forecasting from BoJ (Bank of Japan).

While we’re on the topic of central banks, markets are awaiting another monetary decision taking place tomorrow from the Federal Reserve. While rates will be kept on hold at 5.5%, we have seen major swings from its most recent meetings. This comes down to comments from policy makers in the aftermath creating market speculation of when the first rate cut will take place. Keep in mind that out of all G10 nations, USD has been the best performer in 2024 followed suit by the GBP in second place.

GBP/EUR 1.1670 GBP/USD 1.2674 GBP/AED 4.6485
GBP/AUD 1.9482 GBP/CHF 1.1252 GBP/CAD 1.7207
GBP/NZD 2.0987  EUR/USD 1.0835 GBP/ZAR 23.868

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