Central Banks Take Contrasting Stances: RBA Hits Pause While RBNZ Prepares for Another Hike

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A Pause from the RBA and Another Hike from the RBNZ?

As the week ends, it has been a mixed bag for the GBP and Euro. Let’s start with the sterling news. BoE Governor Andrew Bailey has been vocal in reiterating his stance on fighting inflation, which has helped to calm a nervous market. Bailey also highlighted the strength and robustness of UK banks and reassured the public that the BoE would not be unduly worried about the health of the global financial system. On the data front, the latest quarterly UK growth figures have surprised to the upside, with a 0.1% increase and 0.6% (YoY), exceeding estimates.

These developments, combined with a weaker dollar, have aided in pushing the GBP/USD pair to just over 1.2400, marking levels not seen since the beginning of the year. However, the critical topside level to watch remains at 1.2500. Next week will be dominated by the latest PMIs, house prices, and the Easter holiday.

On the other hand, the Eurozone has seen some mixed inflation reports, with Spain’s inflation almost halving over the past month, while Germany’s dropped from 9.3% to 7.8%. The bond market has reacted to the news, with yields rising across critical German bonds as markets gear up for further ECB hikes. As a result, the single currency has rebounded well after being sold off initially following the recent banking wobbles.

Related Facts

The Sterling has risen by 1.25% against the USD this week.
Spain’s Harmonized yearly inflation almost halved to 3.1% over the past month.
Germany’s Harmonized CPI dropped from 9.3% to 7.8%.
The two-year German bond saw its yield rise by 0.15% to 2.78%.

Key Takeaway

Despite the mixed developments, the GBP and Euro have shown some resilience this week. While the Sterling has enjoyed a bullish run, it remains to be seen whether it can maintain levels above 1.2500. On the other hand, the Euro has rebounded well, aided by perceived ECB interest rate hikes in the future.

Conclusion

The GBP and Euro have had eventful weeks, with many positive and negative developments. While the Sterling enjoyed a bullish run, the main challenge remains at the 1.2500 level. The Euro has rebounded well, supported by perceived ECB interest rate hikes. However, inflation reports and banking wobbles will continue to impact currency markets in the coming weeks, and how markets will respond remains to be seen.