Key Points
Last week saw Bank of England and Federal Reserve raise Interest Rates by 0.25%
Bank of England Governor Andrew Bailey due to testify today and tomorrow.
Majority of key data releases are due at the back-end of the week.
Market Update
GBP
Sterling gained ground last week, notching back-to-back weekly gains against the greenback, benefitting from both a surprisingly hawkish Bank of England decision, and the market aggressively pricing a more dovish FOMC from May onwards
The BoE raised rates by 25bps as expected, taking Bank Rate to 4.25%, however the vote split was more hawkish than expected, with seven policymakers again voting to raise rates, while the statement also retained a hiking bias, which most observers had thought would be dropped
This week, the calendar is significantly quieter, besides some remarks from Governor Bailey, which are unlikely to differ from what was outlined last Thursday, and the final read on Q4 GDP, which is far too stale for markets to be caring about
EUR
The common currency also gained ground lats week, chalking up a third straight weekly advance against the greenback, being one of the major beneficiaries of the aforementioned dovish Fed repricing’s impact on the FX market
This is due to the ECB now, effectively, having become the ‘last hawk in town’, with the Governing Council expected to continue to raise rates into the summer, as almost all of their G10 counterparts have already, or soon will, bring their respective hiking cycles to an end
Looking ahead, Friday brings this week’s main highlight, in the form of the latest ‘flash’ inflation figures, set to show core CPI rising to a new record high 5.7% YoY in March, further emboldening the already hawkish ECB to continue with their tightening plans, potentially further boosting the EUR
USD
The dollar struggled last week, notching a third weekly loss in four against a basket of peers, as the market reacted to the FOMC dropping reference to further rate increases from their policy statement, leading money markets to now price almost 100bps worth of rate cuts by the end of the year
While the aforementioned pricing appears overdone, particularly when many FOMC members foresee rates going north of 5.5% this year, one must think of it as a probability distribution, especially one that is reflective of continuing jitters around the US regional banking sector, and uncertainties surrounding how the saga will pan out
This week, while a host of FOMC speakers will be in front of the mic, ‘hard’ data releases are somewhat lacking, besides Friday’s PCE report, where the keenly-watched core PCE deflator, the Fed’s preferred inflation gauge, is set to have remained at 4.7% YoY in February
World News
Following the collapse of Silicon Valley Bank, their rival First Citizens BancShares are purchasing their assets and loans for nearly $72bn. Under the deal, all 17 former SVB branches will open under First Citizens brand today. The FDIC will still hold around $90bn of SVB’ assets after being seized by regulators.
Microsoft’s £56bn Activision Blizzard merger moves closer as the CMA drops concerns, following fears of games becoming Xbox only. However, its latest findings suggest that there will not be a lessening of competition and that Activision games will still be available on other platforms. The report is set to be finalised by the end of April, which will determine whether the acquisition will go ahead after a lengthy investigation.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 28th March | US | CB Consumer Confidence | 102.9 | 101 |
| Wednesday 29th March | AU | CPI y/y | 7.40% | |
| Thursday 30th March | EU | German Prelim CPI m/m | 0.80% | 0.60% |
| Thursday 30th March | US | Final GDP q/q | 2.70% | 2.70% |
| Friday 31st March | CA | GDP m/m | -0.10% | 0.40% |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7405.45 | 7405.45 |
| DAX | 14957.23 | 15133.68 |
| CAC40 | 7015.1 | 7103.53 |