GBP

The pound has begun the day under pressure against all its major currency peers, falling to its lowest level since November 2020 against the dollar. Sterling was sold aggressively after retail sales figures fell by much more than expected in March. The Office of National Statistics (ONS) data released this morning showed retail sales volumes slid by 1.4% in March from February, a worse reading than the 0.3% fall economists had been predicting. Today’s data followed Bank of England Governor Andrew Bailey warning yesterday that the central bank is walking a “very tight line” between curbing inflation and tipping the UK into recession. Bailey added that there was a real risk that raising rates too fast to keep a lid on the cost of living could slam Britain’s economic recovery from the pandemic into reverse. His “dovish“ comments came as his US counterpart Jerome Powell indicted that the Federal Reserve Bank would raise rates by 0.5% next month. Governor Bailey is due to speak again later today.

EUR

The euro is being pressurised by a rampant dollar in early trading. The single currency had already slid from a one-week high against the greenback yesterday when European Central Bank President Christine Lagarde said the ECB may need to cut its growth outlook further as the fallout from the Ukraine conflict weighs on households and businesses. Lagarde’s comments contrasted with “hawkish” comments from ECB officials earlier in the day that suggested the central bank could raise interest rates as soon as July, which helped the shared currency. The euro also found support yesterday when French President Emmanuel Macron cleared a major hurdle ahead of Sunday’s runoff election with a combative performance in a TV debate against far-right candidate Marine Le Pen. However, those gains yesterday morning have been sharply reversed, as the dollar has found demand from souring risk sentiment and future expectations of central bank monetary policy tightening. President Lagarde is due to speak again later today.

USD

The dollar has found major demand in early trading buoyed by comments from Federal Reserve Bank Chief Jerome Powell which helped bond yields to rise, turned markets risk averse and caused global equities markets to fall. The dollar index, which gauges the strength of the currency against a basket of rivals had dropped below 100 for the first time in a week on Thursday but made a sharp U-turn when Powell said a half-point interest rate hike will be “on the table“ when the central bank meets in May to approve what is expected to be a series of rate increases this year. The index has advanced 2.5% so far this month and is on pace for its best monthly gain since June 2021. Following Powell’s comments, Wall Street closed deep in the red on Thursday and ahead of today’s opening US stock index futures are posting losses this morning.

Economic Calendar

14:00 EUR ECB’s Lagarde Speech
14:45 USD S&P Global Manufacturing PMI
14:45 USD S&P Global Services PMI
15:30 GBP BOE’s Governor Bailey Speech