- The Bank of England boosted rates by 25 basis points to 4.25%.
- Retail sales in the UK unexpectedly increased in February, and businesses reported a second month of growth in March.
- The likelihood of a BOC rate cut on April 12 is around 40%.
Currency futures fell on Friday as the dollar rose amid banking crisis worries. The euro and the pound both experienced significant declines on Friday.
European banking stocks dropped on concerns that the worst issues to affect the industry since the 2008 financial crisis had not yet been resolved. Deutsche Bank and UBS Group took the brunt of the losses.
Risk aversion also caused the sterling to decline by 0.53% to $1.222. This happened despite information indicating that the British economy was poised to expand in the first quarter and that confidence was rising.
Retail sales in the UK unexpectedly increased in February, and businesses reported a second month of growth in March, suggesting the economy expanded in the first quarter.
The pound hit a seven-week high on Thursday after the Bank of England raised rates by 25 basis points to 4.25%. The bank also predicted that inflation would subside quickly, fueling rumors that it had stopped raising rates.
OCBC’s currency analyst Christopher Wong said the FX market indicated a period of risk aversion with safe-haven currencies, gold, and the yen rising. However, the Japanese yen only gained 0.08% against the dollar, closing at 130.73.
The Fed boosted rates by 25 basis points on Wednesday, in line with expectations. However, the Fed adopted a cautious approach to the forecast because of recent instability in the financial industry.
To calm investor concerns, US Treasury Secretary Janet Yellen reaffirmed she was ready to take additional measures to guarantee that American bank accounts remained secure.
The Canadian dollar fell to a nine-day low versus the American currency on Friday before recovering much of its loss. Investors examined data indicating that some important areas of Canada’s economy declined in February.
Due to the banking turmoil, markets expect major central banks, including the Bank of Canada, to switch to lowering interest rates this year. The likelihood that the central bank will cut rates at its upcoming policy meeting on April 12 is around 40%.
Market participants will pay particular attention to this week’s PCE price index release, scheduled for March 31.