1. FX Outlook
  2. Daily FX Report


The German ZEW economic sentiment index dipped to 13.0 for March from 28.1 previously and was below consensus forecasts of 17.1. The current conditions index also dipped to -46.5 from -45.1 the previous month. Given that energy prices have declined, this will cause further concerns over the outlook for both Germany and the Euro-Zone. The overall data impact was, however, limited with markets tending to focus on banking-sector developments.

Overall there were reduced concerns surrounding the European banking sector which helped underpin the Euro during the day.

The dollar overall was mixed, but lost ground against the single currency during the day while it posted gains against commodity currencies.

The Euro strengthened to highs just below 1.0790 before a correction to the 1.0770 area.

There was a limited net shift in Fed funds futures with markets pricing in over an 80% chance that the Federal Reserve will hike interest rates by 25 basis points on

Wednesday. Given that there have been no leaks from the Fed, this appears a very likely outcome. The statement and policy on bond selling will be significant.

Markets will also be looking closely at the latest interest rate forecasts with a particular focus on whether these are cut due to turbulence in the banking sector. Powell’s press conference will also be crucial given that there will have to be some form of updated forward guidance.

Conditions were relatively calm on Wednesday ahead of the decision with the Euro around 1.0760, but there will inevitably be choppy trading after the Fed decision.


US existing home sales strengthened to an annualised rate of 4.58mn in February from 4.00mn the previous month and above consensus forecasts of 4.19mn.

The Philadelphia Fed manufacturing index declined to -12.8 for March from 3.2 the previous month. Sales and revenue remained in positive territory, but there was a

sharp contraction in new orders. Employment reading swerve mixed as there was a decline in part-time jobs while inflation pressures eased on the month.

Companies were less optimistic over the outlook. Given survey evidence, Powell’s commentary on the economic outlook will be important.

With reduced fears surrounding the banking sector, yields moved higher during the day with the 2-year yield moving above 4.15% and the 10-year yield close to 3.60%.

Defensive yen support was undermined by gains in equities and the dollar posted highs around 132.60.

Volatility was contained in Asia with the dollar hitting highs around 132.75 before edging back to around 132.50 with little change in US equity futures.


The latest UK government borrowing data had some impact in undermining Sterling in early Europe. There was also further uncertainty surrounding Thursday’s Bank of England policy decision with markets only pricing in around a 50% chance that there will be a further rate hike, especially given that some members appear certain to vote against any hike. Sterling had been notably resilient when risk appetite dipped earlier in the week and the UK currency again defied normal expectations by losing ground despite a strong advance in equities. In this context, position adjustment had a significant impact during the day.

From highs around 1.2280 against the dollar, Sterling gradually lost ground and dipped to lows at 1.2180 before edging back above the 1.2200 level.

The Euro strengthened to highs at 0.8840 before settling around 0.8810 amid expectations that the ECB would be more hawkish than the Bank of England.

The UK headline inflation rate increased to 10.4% for February from 10.1% the previous month and compared with consensus forecasts of a decline to 9.9%. The core rate also increased to 6.2% from 5.8%. The data will make it more difficult for the Bank of England to back away from interest rate hikes. Sterling strengthened to above 1.2250 against the dollar after the data while the Euro rerated to 0.8775, and there will be further volatility during the day.


The Swiss National Bank will announce its latest interest rate decision on Thursday. Consensus forecasts among economists are that the bank will sanction another 50 basis-point hike to 1.50%. Markets, however, have only priced just over a 50% chance of such a move given uncertainty over the financial sector.

This will inevitably lead to further choppy trading surrounding the policy decision. The franc overall recovered some ground during the day with hopes that the Credit Suisse situation had been resolved without the threat of further contagion.

The Euro retreated from 0.9980 highs to around 0.9930 with the dollar dipping to 0.9210 before stabilising and settling around 0.9230 on Wednesday.

Technical Levels 

Tables 1 (103)

Economic Calendar

Fx Daily Calendar 22032023



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