RedFX Update: Markets shaken by fear & rates are expected to fall in 2023

After a tumultuous 2 weeks, we look at events that will shape the medium moves for currency markets. 

Central Banks are signalling an end to rising rates - the relative pace of the slowdowns will give direction to currency markets. GBP remains resilient, and the ECB is the stand-out Central bank remaining steadfast in the determination to keep raising.

USD: Last week we found out that the US Federal Reserve will not keep increasing rates as anticipated. Although financial market contagion seems limited, the Fed raised by 0.25bp but signalled it will slow down and stop raising in the near future. Markets are now pricing a CUT in interest rates by July23.

EUR/USD has traded between 1.0500 and 1.1000 since January and now sits in the middle of that range. 

Friday’s Inflation data will be very closely watched as it is the Fed’s preferred gauge (Core PCE), and 2nd tier employment data is published on Thursday.

A falling USD has pushed GBP/USD up to 1.2150 (having been at 1.1850 last week) and EUR/USD up to 1.0725 from 1.0600 levels last week.

Main Event of the week: GDP (Thursday 30th) / PCE Inflation data (Friday 31st)

GBP: Last week the Bank of England also raised rates and pushed GBP/USD near to the 1.2300 level and GBP/EUR to recent highs around 1.1400. The key event this week is GDP data released on Friday and markets will be continually data-watching to anticipate the next move in GBP.

Today we have Governor Bailey speaking which will give GBP some medium-term direction as we look for more hints on rates in the UK.

Main Event of the week: Governor speaking (Monday 27th) GDP (Friday 31st)

EUR: After continued aggressive hikes and rhetoric, ECB President Lagarde remains the most hawkish Central Banker around and this will keep the EURO on the front foot – EUR/USD at 1.0800 levels. This week we have President Lagarde speaking on Thursday, along with Confidence data on Wednesday. Also of note this week is some key German data – Inflation on Wednesday and Retail Sales on Thursday.

Main Event of the week: Lagarde’s speech (Tuesday 28th) / Confidence data (Wednesday 29th) / German data (Thursday 30th)

Australia Main Event of the week: Inflation (Wednesday 30th)

Today’s Rates:

EUR/USD         1.0775

EUR/JPY          141.40

GBP/EUR         1.1375

GBP/USD         1.2250

Finance calendars

The following tables indicate the major future events in the FX market. Each of the points may represent major changes, so stay tunned and in alert!