The US Fed considering multiple 50 Bps rate hikes for this year

USD

The EU stated they were prepared to take more action on top of existing sanctions to isolate Russia from global finances and trade.

Safe-haven flows to the US dollar remained and the GBP/EUR rate saw a little recovery, but against the USD it was mostly flat.

Yesterday evening Federal Reserve Chair Jerome Powell gave a very hawkish speech outlining how the Fed will tackle the rapidly rising inflation. He said the central bank must move “expeditiously” to raise rates and possibly “more aggressively” to keep an upward price spiral from getting entrenched. This could indicate that the Fed could not only raise interest rates again at their next policy meeting but also that they may look at a 50 basis points increase more than once for the remainder of the year. Powell went on to say “nothing is stopping policy makers from hiking in May but the decision has not been made yet”. However he acknowledged it was possible if warranted by incoming data.

With future rate hikes from the Fed already being priced in, we saw little movement from USD.

GBP

Whilst the conflict in the Ukraine continues it is hard to see upside for the pound with the Bank of England seeming cautious for the future outlook.

This morning, the Office for National Statistics confirmed that UK government borrowing rose more than expected last month as rising inflation pushed up debt interest payments. This comes just before the Chancellor Rishi Sunak presents his Spring Budget tomorrow. The ONS said the government’s budget deficit – the gap between spending and income – was £13.1bn in February, the second highest borrowing figure for that month since records began in 1993. We will likely see consumer confidence continue to be eroded as the cost of living is bound to hurt the public purse.

Key announcements

13:15 – EUR – ECB President Lagarde speaks
15:15 – GBP – MPC Member Cunliffe speaks
21:00 – USD – FOMC Member Mester speaks