Key Points
All eyes will be on this week’s Annual Budget set by the UK Government.
Last week saw GBP remain volatile, with the currency rebounding towards the end of the week.
ECB set to increase the Interest Rate by 50 basis points on Thursday.
Market Update
GBP
Sterling traded unchanged on the week last week, though this overshadows some significant intra-week volatility, with the quid briefly dipping to its weakest since the fourth quarter of last year, before recovering ground
Once again, the pound found itself at the mercy of broader moves in the USD, with the aforementioned losses coming as a result of surprisingly hawkish testimony from Fed Chair Powell, before the buck reversed course amid lower Treasury yields stemming from concern over SVB
Looking ahead, this week’s main event comes on Wednesday, with Chancellor Jeremy Hunt delivering the Budget, though major new policies are likely to be thin on the ground; the latest labour market data, due Tuesday, will also be in focus
EUR
The EUR also found itself at the mercy of the buck last week, similarly trading largely flat on the week, with the bulls wrestling back control of proceedings as the week drew to a close
This week, Thursday’s ECB decision will be the main event, with markets fully pricing a 50bps hike, despite ongoing volatility stemming from the collapse of SVB
With such a hike fully expected, attention will turn to the Governing Council’s policy guidance; namely, whether a downshift to 25bps hikes is likely from the May meeting onwards, and whether the GC seem likely to raise rates to the 4% terminal level that markets currently price
USD
The buck, as noted above, had a week of two halves, gaining ground initially as Fed Chair Powell threw the prospects of a 50bps March hike onto the table, before reversing course as news of SVB’s woes spread, sparking a rally in Treasuries, which produced stiff headwinds
In the midst of all this, we can’t forget Friday’s labour market data, which showed another solid month of job creation, with 311k jobs added; however, unemployment rose to 3.6% as more people entered the labour force, while earnings growth slowed to 0.2% MoM
This week, while fallout from the SVB saga will likely dominate, markets also have the latest US CPI figures to chew over, with another hotter than expected print having the potential to derail the dovish repricing seen since the Fed announced emergency liquidity provisions over the weekend
World News
Following regulators seizing assets from SVB on Friday, this is the largest failure of a US bank since the 2008 Financial Crisis. US authorities took emergency measures on Sunday to rescue to banking system after Silicon Valley Bank and Signature Bank collapsed. Everyone who have money deposited with SVB would be able to access all their cash from Monday. HSBC have also rescued SVB’s UK arm following talks with the Bank of England.
Rishi Sunak has pledges to increase defence spending by near £5 billion over the next two years to counter threats from hostile states. The Aukus Pact was signed to counter Chinese military power and the new pact is set to supply Australia with nuclear powered submarines, this will require investment of around £3 billion, whilst the remaining £2billion will be used to replace weapons sent to Ukraine and improve the UK’s munition infrastructure.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 14th March | UK | Claimant Count Change | (12.9k) | 12.5k |
| Tuesday 14th March | US | CPI y/y | 6.40% | 6.00% |
| Wednesday 15th March | UK | Annual Budget Release | ||
| Wednesday 15th March | US | Retail Sales m/m | 3.00% | -0.30% |
| Thursday 16th March | EU | Interest Rate Decision | 3.00% | 3.50% |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7748.35 | 7748.35 |
| DAX | 15427.97 | 15435.16 |
| CAC40 | 7220.67 | 7211.44 |