The continued conflict in The Middle East has kept Oil prices elevated above $100 per barrel as the war seems set to continue after an Israeli air strike killed Iran Security Chief Ali Larijani. Markets remain largely cautious of the inflationary impact with energy-fuelled inflation leading to a more hawkish stance from major central banks globally.
The Reserve Bank of Australia raised their interest rates yesterday and that moves us nicely onto later in the session with two central bank interest rate decisions. First up we have the Bank of Canada, to be followed by The Federal Reserve in The U.S later this evening. Both central banks are set to leave their rates unchanged which shouldn’t come as a surprise as governments globally are currently taking a wait and see approach to inflationary effects from Oil price surges.
With that in mind, markets are currently largely pricing out any expectations for any interest rate cuts by The Federal Reserve until at least September. This may well be a similar stance adopted by The Bank of England & The European Central Bank. Moving further through the year, if Inflation continues to drive in the wrong direction it could be that we actually see these Central Banks pivot to increasing interest rates in an attempt to combat higher energy prices throughout the winter.
As always, any commentary after the decisions over the next 48 hours could spring some surprises on the market and bring some unwanted volatility to exchange rates.
GBP/EUR 1.1563 GBP/USD 1.3341 GBP/AED 4.9026
GBP/AUD 1.8776 GBP/CHF 1.0489 GBP/CAD 1.8278
GBP/NZD 2.2779 EUR/USD 1.1527 GBP/ZAR 22.2258