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Dealer Comments

Morning FX Comment 31.03.2023


A 180 degree session yesterday in European rates, with yields initially lower (-13bps) on Spanish and German regional inflation data. Yields ended up over 10bps higher in the afternoon, following a strong German inflation print. French CPI released this morning was largely in line with expectation. The data confirms that despite headline being lower because of base effects, core inflation continues to be high and sticky.

All focus today on the Eurozone HICP print, which will be released at 11am. Core in particular focus, with market expecting a reading of 5.7%.

Terminal rate pricing continues to retrace declines from the SVB/Credit Suisse fallout, with market now pricing a terminal rate of over 3.6% by November and just 5bps of cuts priced in 2023.

EUR/GBP remains in a tight range, and currently trades close to £0.88.


Mixed data out of the UK this morning. Nationwide house prices fell by more than expected. Housing is the most sensitive part of the economy to changes in interest rates, and its sharp-paced correction in recent months clearly shows the restrictiveness of the Bank Rate. GDP on the other hand was revised upwards.

EUR/GBP Continues to be well supported by it’s 100 Day Moving Average at £0.8780, A break above resistance at the 50 Day Moving Average at £0.8831 opens up a test of the 13th March highs around £0.8892.


Relatively calm markets over the past few sessions have brought focus back onto inflation figures due for release today. Consensus is for core PCE to remain sticky at 4.7%, with headline PCE expected to fall to 5.1% (from 5.4%). However, given the readings are for February (before the banking stress emerged), markets are likely to largely look through anything but a significant surprise in either direction. The final readings of the March Michigan sentiment indicators will also be in focus, as they will give some indication of the impact of the SVB fallout on economic sentiment.

More generally, while U.S. regional bank stock indices have suffered a hit of about 20% from the March stress, the wider S&P500 is on track to end the first quarter today some 5% higher. The tech-heavy, interest-rate sensitive Nasdaq is up 14%. Fed speakers therefore continue to convey a relatively hawkish message. Yesterday speakers included Collins, Barkin and Kashkari, all of whom said inflation remains too high but were non-committal on rate outlook given uncertainty in the banking sector.

USD slightly weaker on the week, with EUR/USD trading close to $1.09 this morning, and GBP/USD closing on $1.24.


Author: Kelly Hitchcock
Tel: 1800 30 30 03 / +353 (0)1 790 0000

30 Mar 2023

Morning FX Comment 30.03.2023


Yesterday ECB Chief Economist Philip Lane commented that from a Macro perspective the recent events within the Banking sectors were a non-event and that he expects turmoil to settle down and that, rather than cuts, rate hikes are needed. Hawkish rhetoric also followed from number of ECB commentators including Elderson this morning stating that “inflation is too high, we have to bring it down”.

The ECB rate priced in by overnight index swaps for the December meeting rose +3.7bps, bringing the expected rate to 3.3%, therefore pricing in just 5bps of cuts by year-end, given the current terminal rate is priced at 3.39% in October. The 2yr German bund yield climbed by +6.3bps and the 10yr bund yields rose by +3.8bps

In terms of data yesterday, we had the German GfK consumer confidence come in slightly above expectations at -29.5 (vs -30 expected). In France, the consumer confidence index was in line with expectations at 81, down from 82 in February.

Ahead today we have Eurozone March economic, industrial and services confidence data, as well as German and Spanish inflation data along with Italian PPI and unemployment date to digest.

Spanish prelim headline inflation data surprised lower as we write, printing at 3.1% (vs 3.7% expected) as energy costs retreated, however Core inflation continue to remain sticky, dipping only slightly from last month at 7.5%.

EUR/GBP is continuing to trade lower on the back of this print, currently at 0.8782


Data in the UK yesterday reflected a stronger real economy, as both February UK consumer credit data (£1.41 billion vs £1.2 billion expected) and mortgage approvals (43.5k vs. 41.3k expected) beat expectations. After the data release, we heard from BoE’s Mann who emphasised that the outlook for the UK economy had improved with the lower energy costs, and for the first time called for minimum buffers for LDI funds.

GBP/USD is currently trading at 1.2329



Risk assets continue from yesterday’s positive momentum this morning, although bond yields have stabilised somewhat. US 2 year yields open up at 4.11% and US 10 year yields open up at 3.55%.

Toward the end of the US trading session yesterday, there was a Bloomberg report suggesting that the FDIC was planning on having the biggest US banks shoulder a “larger-than-usual” share of the $23bn cost from the SVB and Signature bank failures. This weighed on Banking stocks, however with the larger banks benefiting from most of the recent inflows of deposits from the regional Banks, they’re seen as a clear beneficiary and this should help to mitigate some concern around bearing these costs.

We also heard from Fed’s Barr yesterday, who highlighted that the Fed intends to maintain its “meeting-by-meeting judgement on rates” and that “incoming data” will continue to be analysed.

Yesterday, we saw US pending home sales for February beating expectations to come in at 0.8% (vs -3.0% expected) MoM. Pending home sales YoY rose to -21.1% from -22.4%. We also saw the US MBA purchase index continue its modest pick-up off very weak levels, coming in at +2.9%, although this is down slightly from +3% last week.

Today, we’ll get the usual weekly initial jobless claims, however market will be looking to settle ahead of tomorrow’s US PCE print.

EUR/USD is currently sitting at 1.0829


Author: Kelly Hitchcock
Tel: 1800 30 30 03 / +353 (0)1 790 0000
Morning FX Comment 28.03.2023

Relatively calmer markets in Europe so far this week following recent banking turmoil as sentiment stabilized. The German 2-year yield is threatening 2.6% this morning, with S&P up 0.2% and Eurostoxx up 0.8% on the day through Monday.


Data wise, the ifo rose in March to its highest level since February 2022. Firms report both better current activity and an improved outlook.


Key CPI data later this week will be closely watched. Focus will be on the core CPI reading, particularly after ECB Vice-President de Guindos commented that “core inflation is going to be key. It is very difficult to converge towards the 2 per cent target in a sustainable way without a clear decline in core inflation”.


EUR/GBP weakened slightly and opens at £0.877 this morning.


UK data is relatively light this week, with GDP data towards the end of the week. More attention is likely to be put on the BoE speakers following the recent hike in rates and less dovish tone.

Today, Bank of England Governor Andrew Bailey along with Deputy Governor Dave Ramsden testify to the Treasury Committee in Parliament about the collapse of SVB Financial.

Catherine Mann also speaks later in the week.


Inflationary pressures in the UK were highlighted again this morning, with the BRC Shop Price Index YoY up 8.9% (from 8.4% last month), adding further support to the currency.


Peak rate in the UK is now priced above 4.6%, with 20bps priced for the May meeting.

Weaker dollar in a risk-on environment has been the theme of the week so far, with 2-year US yields up 20bps through Monday’s session. Positive news from the beleaguered US banking sector supported the move, where First Citizens BancShares said on Monday it will acquire all the loans and deposits of failed U.S. lender Silicon Valley Bank. In addition, reports circulated at the weekend that U.S. authorities are considering expanding the Federal Reserve’s emergency lending program that would offer banks more support.


Today and tomorrow, the Senate and House are holding a hearing on recent bank failures, where further news regarding the extent of deposit insurance and other banking regulation plans may significantly affect market sentiment.


Dollar weakened through Monday, with EUR/USD opening above $1.08 this morning and GBP/USD opening comfortably above $1.23.

Author: Kelly Hitchcock
Tel: 1800 30 30 03 / +353 (0)1 790 0000

27 Mar 2023

Morning FX Brief - 27.03.2023


After a heavy week of losses and negative risk sentiment spreading through the financial sector, some buyers stepped back in and fears seem to dissipate slightly into the close on Friday. Risks remain elevated and with another busy week ahead.

the March composite PMI for the Euro Area beat expectations at 54.1 (vs 52 expected). While manufacturing remained in contraction (47.1 vs 49 expected), services demonstrated strength (55.6 vs 52.5 expected) as the energy shock that developed through autumn last year continued to ease.


All eyes will be on the preliminary inflation readings across the Eurozone this week. March data for Germany will be out on Thursday, followed by reports for the Eurozone and France on Friday. Away from these we also have Ifo survey (today) and consumer confidence (Wednesday) in Germany, as well as manufacturing (tomorrow) and consumer confidence (Wednesday) in France.



Sterling lost a bit of steam into the end of last week moving south from a high print of 1.23. The lack of economic indicators this week will leave GBPUSD to trade in line with risk sentiment. Governor Bailey is due to speak at a LSE event and could well move the pair slightly with any hint of further policy action. After the recent beat in inflation data, the BOE will have a tough balancing act to manage and investors will no doubt focus on their commitment to bring down inflation.



It was notable the outflows of funds from Banks into money market funds over the past few weeks. Money market funds attracted over USD 300 billion over the past four weeks, this was the fastest pace since 2020. This will keep the pressure on the Banking sector. These outflows are notable as prior surges into these funds coincided with the end of the Fed tightening cycles. Treasury yields were highly volatile last week with the lows being 3.58% on the 2 year. We’re kicking off the week well off the lows here at 3.85% with futures an improved level of risk sentiment vs last week.


In terms of data prints on Friday – The US composite PMI beat expectations at 53.3 (vs 49.5 expected) and printed well into expansionary territory, as both manufacturing (49.3 vs 47 expected) and services (53.8 vs 50.3 expected) surpassed forecasts.

Author: Jake Reihill
Tel: 1800 30 30 03 / +353 (0)1 790 0000

24 Mar 2023

Morning FX Comment 24.03.2023


European yields dropped sharply during Thursday’s session, continuing into Friday morning, with German 2 year yields down 40bps from Thursday’s highs. As in other jurisdictions, markets continue to price a higher likelihood that we are near the end of the ECB hiking cycle. Less than 40bps of hikes remain priced in Europe, spread across the May and June meetings. Signs of further banking stress in Europe this morning are adding to the risk-off sentiment and weakening the currency.

In terms of data releases, the primary focus in Europe today will be on PMIs, with market expecting the composite measure to remain steady from February, at 52. We also have 3 ECB speakers during the course of the day.

EUR/USD weakened this morning, dropping back below $1.08, and currently trades at $1.079.



The market interpreted the BoEs statement quite dovishly, while Bailey’s assessment that the upside surprise in February’s inflation print may have been temporary added to that sentiment. Bailey suggested that  “most of the surprising strength in the core goods component was accounted for by higher clothing and footwear prices, which tend to be volatile and could therefore prove less persistent.” Similarly, in their statement the BoE stated that they expect wage growth to moderate more quickly than previously expected due to lower inflation expectations.

UK yields fell across the curve, while GBP/USD gave up most of its post-Fed gains and currently trades at $1.225.

Focus today for the UK is on BOE’s Catherine Mann speaking later in the afternoon, while March PMIs are also released.



Yellen’s comments regarding deposit insurance in the US have caused ripples across markets in the past couple of sessions. The Treasury Secretary said Wednesday that officials had neither considered nor examined the possibility of expanding federal insurance temporarily to all US bank deposits without congressional approval. Yesterday, she softened her language somewhat by saying that “we would be prepared to take additional actions if warranted.”

Investors continue to dissect the Treasury Secretary’s comments, with uncertainty remaining high in the market. This morning, US yields are down a further 5 to 10 bps across the curve, as the market continues to price an increased likelihood that we have reached the peak of the hiking cycle.  The market has priced just a 40% chance of a 25bps hike priced for May this morning.

Focus today is on the release of March PMIs, with expectations that the composite measure dips back below the 50 mark.



Author: Kelly Hitchcock
Tel: 1800 30 30 03 / +353 (0)1 790 0000

23 Mar 2023

GBP Flash Update

The BOE increased the Bank Rate by 25bps to 4.25%. This was largely expected after yesterday’s above consensus inflation print.   The voting split was 7-2 in favour of the 25bps hike, with voters Dhingra and Tenreyro voting to keep the rate unchanged.

The BOE stressed that inflation persistence would require more hikes. This delivery is arguably slightly more hawkish than what the market expected.

The market is now pricing in a slightly higher probability of another 25bps (> 50%) hike at the next policy meeting.

GBP/USD seems well contained in today’s range, looking to test today’s highs and currently trading at 1.2334


Author: Kelly Hitchcock
Tel: 1800 30 30 03 / +353 (0)1 790 0000