Pound choppy on BoE Governor Bailey’s Remarks

Philip McHugh March 29th 2023 - 2 minute read

The pound wobbled yesterday as markets digested mixed comments from Bank of England (BoE) Governor Andrew Bailey.

Today the pound is broadly flat. GBP/EUR is stable at €1.1374, while GBP/USD and GBP/CAD are also steady at US$1.2320 and CA$1.6770. However, GBP/AUD and GBP/NZD are ticking higher, rising to AU$1.8461 and NZ$1.9754, respectively.

Coming up, rate setters from the European, British and US central banks are due to deliver speeches today. Could hawkish comments lift the respective currencies?

What’s been happening?

The pound experienced turbulence during Tuesday’s session as investors responded to comments from Bank of England Governor Bailey.

Giving evidence to the Treasury Committee, Bailey warned of ‘heightened’ tensions in financial markets. He also reiterated the BoE’s commitment to bringing down inflation, boosting interest rate rise bets. These two factors pulled GBP in different directions.

Meanwhile, the safe-haven US dollar shed the morning’s modest gains as the market mood improved in the afternoon. An unexpected rise in US consumer confidence only added to the upbeat tone.

The euro enjoyed support as fears about the European banking sector continued to fade. However, the risk-on impulse saw EUR cede some of its gains against its riskier rivals.

What’s coming up?

Today’s session kicked off with Germany’s latest consumer confidence reading. Although morale rose, it improved less than forecast, so any gains for EUR may be limited.

This afternoon, Federal Reserve policymaker Michael S. Barr is due to testify in front of Congress. If Barr hints at the Fed’s willingness to raise interest rates further, USD could strengthen.

Likewise, the Bank of England’s Catherine Mann and Isabel Schnabel from the European Central Bank (ECB) will deliver speeches this evening. Both rate setters are considered fairly hawkish, so their comments could lift the pound and the euro, respectively.

In the meantime, the market mood could drive most movement in GBP, USD and EUR exchange rates. Equities are up this morning as sentiment continues to stabilise. If the tone remains upbeat, the US dollar could slip and the pound may rise.

Written by
Philip McHugh

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