The GBPUSD currency pair was trading up over 78 pips as the Sterling pound rallied higher against the US dollar. The pound’s rally was primarily driven by positive investor sentiment towards the UK banking system, which has been insulated from the turmoil witnessed in the EU and US financial sectors.
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UBS's rescue of Credit Suisse has left the markets in a state of uneasy clams as investors worry about more banks going into financial distress after their customers and the markets lose confidence in them. However, it is still too early to say that the worst is over for the global banking system.
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Analysts at ING also issued a research note about the upcoming Bank of England interest rate decision scheduled for Thursday, March 23, 2023. The BoE could proceed with a 25 basis points rate hike at the meeting, but the decision rests heavily on what happens in the markets this week.
Luckily for the Sterling pound, the BoE had set a lower peak rate than its US and EU counterparts, which has worked in the GBP’s favour since investors had already priced in the most likely rates scenario, unlike for the EU and US, whose peak interest rate predictions may have to be adjusted lower.Â
The ING note indicated that the Dutch multinational banking Group believes that BoE policymakers will vote in a divided manner as the doves vote for a hold and the hawks vote for a bigger rate hike. However, the centrist policymakers, including the BoE Governor, will likely vote for a 25 bps rate hike.
Still, a lot could happen between now and Thursday as the Federal Reserve is expected to announce its interest rate decision on Wednesday. Many expect it to hike rates one last time before it stops hiking. Many expect the Fed to slash rates later this year.
The BoE’s rate decision will also depend on the latest UK inflation report set to be released on Wednesday, just one day before the central bank releases its monetary policy decision. Currently, the Sterling pound remains stronger than the US dollar.
*This is not investment advice.
The GBPUSD price chart.
The GBPUSD currency pair was trading up over 71.8 pips (0.59%) as the Sterling pound rallied against the US dollar.
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