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Currency Market Update - 2nd May 2023

Currency Market Update - 2nd May 2023With just a 4 day week ahead of us in the UK before the King’s Coronation, we have a relatively volatile week on the cards with Central Banks as the key focus- which could present some great opportunities for those buying and selling Sterling.

First of all, on Tuesday morning we have the RBA interest rate decision which is expected to keep rates unchanged at 3.6%, this should come as no surprise to anyone trading the AUD as the Central Bank has been clear on their path forward and a need to pause rate hikes. Later we have UK Nationwide Housing Prices (YoY) which I do expect to see a slightly lower number for- UK housing has definitely moved lower from the peak of last July due to increased borrowing costs and a slower moving market- the forecast is -3.6% and I do not expect to see much deviation from this number.

Also on Tuesday, we have EU Core inflation data which is expected to remain the same at 5.7%- this is pretty important as if we see a lower number for this reading then this may cause the ECB to have a less hawkish stance on rate rises moving forward, which would in turn help GBPEUR move higher, the European economy has been performing well and reacting positively to increased borrowing costs so I would not be surprised if we saw a slightly lower number.

On Wednesday the main focus will be the Fed interest rate decision where we are expecting to see a 25 bps hike to 5.25%, the real meat of the move will come from Fed Chair Jerome Powell’s speech after the decision- the markets are waiting to see how many more hikes the Fed are looking to do, and this in turn will shape Global monetary policy.

On Thursday it is the ECB’s turn to hike rates and we are also expecting 25bps leaving them at a rate of 3.75%- again the speech following the decision is where we will see any market movement, and any signs of slowing down from the ECB is good news for GBPEUR, if they are looking to continue down this hawkish path then GBPEUR will probably move lower.

On Friday the main event is Non Farm Payroll’s out of the U.S alongside Unemployment, we are expecting to see Unemployment rise to 5.1% and therefore we expect a lower NFP number- however this data release never usually matches up to expectations but with the amount of job cuts in the U.S currently we should see a lower number on Friday which would weaken the Dollar.



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