Key Points
US and UK Interest Rate increases expected later this week.
Manufacturing and Services PMIs for EU, UK and US on Friday.
UK Inflation expecting to drop under 10% for the first time since September 2022.
Market Report
GBP
Sterling ended the week marginally firmer against the buck, testing the 1.22 handle into the weekend, with the move coming almost solely due to a softer USD, rather than any UK-specific factors
In fact, there was relatively little UK data or news for traders to dig into last week; the latest labour market figures were solid but unsurprising, while Chancellor Hunt’s Budget delivered little in the way of surprises, or macroeconomic gamechangers
Looking ahead, Thursday’s Bank of England decision will be this week’s main event, with markets pricing a 50/50 chance of another 25bps hike, though financial stability concerns could lead the ‘Old Lady’ to keeping rates unchanged. The latest inflation, public borrowing, and retail sales figures will also be in focus
EUR
The EUR also gained ground against the USD last week, chalking up a third straight weekly advance, though again largely owing to external factors
Last week’s ECB decision didn’t cause much volatility in the EUR, as policymakers would’ve intended, with the Governing Council proceeding with a 50bps hike, despite concern about potential contagion stemming from Credit Suisse’s ongoing troubles
This week, the economic calendar is rather quieter, with only Friday’s ‘flash’ PMIs of note, expected to show a further uptick in economic activity across the bloc
USD
The greenback saw its third weekly loss in a row last week against a basket of peers, facing stiff headwinds as a result of tumbling Treasury yields – the 2-year falling a whopping 75bps in its biggest one-week decline since the late-80s – due to a surge in haven demand amid concerns over the health of the global financial sector
Not only have markets become increasingly concerned about the solvency of US regional banks since the collapse of Silicon Valley Bank, but concerns over broader, global issues have also surged, amid the ongoing plight of Credit Suisse
Looking ahead, while the aforementioned factors will be the primary drivers of risk appetite, markets also have an FOMC decision to contend with; the Fed will likely hike by 25bps, a move to which markets assign a 2-in-3 chance, with focus instead falling on Chair Powell’s remarks, and the chances of further hikes being delivered into spring
World News
Following the US bank chaos last week that sent shockwaves throughout the baking sector, Credit Suisse has been rescued by UBS in a takeover deal worth $3.15bn, way under its $8bn market valuation. Following the announcement, the majority of banks have seen their share prices fall as there is growing concern around the stability of the banking sector, after 2 collapses in the space of a week.
The International Criminal Court has issues Vladimir Putin an arrest warrant for the alleged war crimes and trafficking of children However, Putin seems unfazed by this, as he visits Crimea to show that he can go wherever he wants no matter what. Germany is obliged to arrest Putin foot within its territory, if requested to do so by the ICC.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Wednesday 22nd March | US | Interest Rate Decision | 4.75% | 5.00% |
| Thursday 23rd March | UK | Interest Rate Decision | 4.00% | 4.25% |
| Friday 24th March | UK | Flash Manufacturing and Services PMI | ||
| Friday 24th March | EU | Flash Manufacturing and Services PMI | ||
| Friday 24th March | US | Flash Manufacturing and Services PMI | ||
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7335.4 | 7335.4 |
| DAX | 14768.2 |
14715.4 |
| CAC40 | 6925.4 | 6900.9 |