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Market Update

• Posted by currencies in Bank of England, Currency, Dollar, Economy, EUR, Fed, GBP, Inflation, Rate Cuts, Rate Hikes, Sterling, UK, Uncategorised
• March 25, 2024
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UK Retail Sales showed promising signs for The UK economy, with figures coming in better than initially anticipated, albeit flatlining last month against expectations of a decline in sales. Any further optimism towards The UK’s economic health may well come in the form of our GDP numbers on Thursday, which will outline whether the recent recession was short-lived. A stronger than expected data release would provide some much needed strength to GBP pairs after a slight dip towards the end of last week.

Steering away from economic releases, central banks are back in focus with bets now ramping up amongst traders as to when The Federal Reserve and Bank of England both implement their first interest rate cut of 2024. Both central banks have been reluctant to mention any concrete plans to cut their rates, until last week when The Federal Reserve Chair Jerome Powell reiterated their intention to cut rates before the end of the year. Markets are now pricing in a 74.5% possibility of a June cut in The U.S, especially given the fact that The Swiss National Bank became the first Western central bank to reduce rates. This has also increased the odds on when The Bank of England will look to cut interest rates, with some traders and analysts looking to May for the first cut. This is due to the fact many believe Inflation in the UK will be below the 2% within the next 8 weeks as well as the added pressure to potentially keep up with central banks elsewhere. Although a June cut is more likely, traders are now pricing in a May rate cut at roughly 25%.