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GBP/USD gains after Bank of England’s decision

Tuesday, March 26, 2024

Today’s headlines

What’s happening: The British pound moved higher against the US dollar on Monday, following last week’s move by the Bank of England.

What happened: Traders have been watching comments from central bank policymakers for insights into the timing of their first interest rate cuts.

Although the GBP/USD fell sharply after the Bank of England’s latest decision last week, the forex pair gained on Monday.

Why it matters: The GBP/USD forex pair lost almost 1% last week after the Bank of England kept interest rates unchanged at 5.25%. Governor Andrew Bailey maintained a dovish tone, saying that “things are moving in the right direction” for rate cuts this year.

Inflation in the UK has slowed from a peak of more than 11% in 2022 to 3.4% during the twelve months to February this year. With easing inflation, markets widely expect the Bank of England to cut interest rates in June.

Data released on Monday showed that the UK’s monthly retail sales balance from the CBI (Confederation of British Industry) had climbed to a reading of +2 in March, compared to -7 a month ago.

Prospects of the Federal Reserve keeping its interest rates higher for longer have provided a boost to US bonds and lent support to the US dollar. The US dollar index, which measures the greenback’s performance versus major peers, fell to 104.23 on Monday, after adding about 1% in last week.

The GBP/USD pair rose to 1.2635 on Monday, after hitting a one-month low of 1.2576 on Friday. The EUR/GBP forex pair remained almost flat at 85.78 on Monday, after hitting a two-month high of 86.02 on Friday.

London’s FTSE 100 index fell 0.17% to close at 7,917.57, while the FTSE 250 index dipped 0.56% to settle at 19,613.53 on Monday.

What to watch: Investors await the release of economic reports on current account and GDP growth rate from the UK on Thursday. The current account deficit in the UK, which shrank to £17.2 billion in the third quarter, is expected to widen to £21.4 billion in the fourth quarter.

Analysts expect the British economy to contract by 0.2% year-over-year in the fourth quarter, after 0.2% growth in the prior period.

The markets today

US stocks will be in focus today ahead of a basket of major economic reports

Context: US equity markets started the holiday-shortened week on a cautious note ahead of inflation data scheduled to be reported later this week.

Details: All three major US stock indices closed Monday’s session in the red, with the Dow Jones recording the biggest percentage loss.

The US Federal Reserve held interest rates unchanged last week, while signalling three rate cuts this year. Investors are looking forward to the release of the PCE (Personal Consumption Expenditures) data on Friday, to get further insights into future rate cuts. US stock markets will remain closed that day for the Good Friday holiday.

Analysts expect the PCE data to show prices increasing by 0.4% in February, following a 0.3% rise in January. However, core price inflation is expected to ease to 0.3% in February, versus 0.4% in the previous month.

The blue-chip Dow Jones index fell 162.26 points, or 0.41%, to close at 39,313.64, while the S&P 500 declined by 0.31% to settle at 5,218.19 and the Nasdaq 100 lost 0.34% to reach 18,277.06 on Monday.

What to watch: Investors await the release of economic data on durable goods orders, home price index and Richmond Fed manufacturing index from the US today. New orders for manufactured durable goods in the US, which fell by 6.1% in January, are expected to increase by 1.1% in February.

Analysts expect the S&P CoreLogic Case-Shiller 20-city home price index to fall 0.1% in January, following a 0.3% decline in December. The composite manufacturing index in the US Fifth District area is expected to improve to -4 in March, from -5 in February.

Other Markets: European indices closed mixed on Monday, with the DAX 40 and STOXX Europe 600 Index up by 0.30% and 0.04%, respectively, and the FTSE 100 and CAC 40 down by 0.17% and 0.01%.

The news shaping the markets

At least seven refineries in Russia have been closed due to Ukraine’s drone attacks in the first quarter of the year, resulting in Russia losing 7% of its total oil refining capacity. The news sent the WTI crude oil prices higher this morning.


Argentina recorded a current account deficit of $3,420 million in the fourth quarter, versus a year-ago surplus of $1,745 million, exerting pressure on the ARS/USD forex pair.


Colombia’s industrial confidence indicator fell by 0.5 points to -0.3 in February, from 0.2 in the previous month. However, the volume of orders increasing last month sent the COP/USD pair higher in forex trading this morning.


Taiwan’s industrial production declined by 1.10% year-over-year in February, after surging 15.61% in the prior month, which exerted pressure on the TWD/USD forex pair.


US new home sales fell by 0.3% to an annualised rate of 662,000 in February, missing market estimates of 675,000, which sent the Dow Jones index lower by more than 150 points on Monday.

What else to watch today

Saudi Arabia’s balance of trade, Germany’s GfK consumer climate indicator, South Africa’s composite leading business cycle indicator, Spain’s gross domestic product, Brazil’s mid-month consumer price inflation and central bank of Brazil’s Copom meeting minutes, Canada’s wholesale sales, US Redbook index, FHFA house price index, Dallas Fed general business activity index and API crude oil stock change, as well as Argentina’s economic activity estimator.


Site by Pink Green
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