USD a safe-haven currency while the UK growth set to slow down!

Here we look at the path of GBP and EURO. The USD continues to hold strong as a safe-haven currency as the Ukraine conflict continues.

GBP: The IMF revised global growth and national growth forecasts yesterday and placed the UK at the bottom of the G7 rankings: “The UK's economy is now predicted to grow by 3.7% this year, down from the previous forecast of 4.7% made in January. However, next year, the UK is expected to have the slowest growth in the G7 and across Europe's main economies, at just 1.2%, a near halving from the 2.3% expected previously”

Governor Bailey’s speech this Thursday will be key for GBP, with investors expecting a 4th consecutive rate hike in May – possibly boosting GBP.

GBP/USD was already under 1.3000 and the rate has only just managed to hang on. If not for EURO weakness, we could expect GBP/EUR (currently at 1.2025) to follow suit with a big down-move.

EURO: Commerzbank comments show how tilted the market is to selling EURO – “At some point in time, the market can presumably be certain that the ECB is likely to hike its key rate in the autumn. However, the euro will only be able to recover once there is increasing certainty. At the moment the market does not have this certainty so downside risks dominate in the euro”

Bloomberg picks the French election result as another possible negative for the shared currency - “If nationalist Marine Le Pen upsets the incumbent, European stocks are likely to slump Monday, while French bonds would underperform German securities and the €€ could even trade at parity with the dollar in coming months”

AUD: Gaining ground steadily as a rate hike looms in order to battle inflation. Comments from the Central Bank have removed the reference to being ‘patient’ and the market expects a June hike. GBP/AUD has tumbled from 1.9000 levels last year to 1.7600 today.

Sweden: With Sweden set to hike rates soon, EUR/SEK is testing much lower levels around 10.25 area.

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The RedFX Team