- Pound (GBP) falls as HSBC buys SVB’s UK arm
- UK Budget is due on Wednesday
- Euro (EUR) rises in risk-off trade
- ECB rate decision is due on Thursday
The Pound Euro (GBP/EUR) exchange rate is falling after three days of gains. The pair closed 0.30% higher on Friday, settling at €1.1306, after trading in a range between €1.1292 – €1.1309. At 09:15 UTC, GBP/EUR trades -0.11% at €1.1293.
The pound is heading lower in risk-off trade at the start of the week as investors continue to assess the latest developments in the banking sector and look ahead to the treasury’s Budget on Wednesday.
The pound finished last week on the front foot after UK economic data showed that the economy grew at a faster pace than expected in January. The January GDP rose 0.3% month on month, well ahead of the 0.1% rise forecast and firmly up from -0.5% contraction in December. The data helped ease recession fears ahead of the chancellor’s budget this week.
Ahead of the budget, the market is focusing today on the fallout from the collapse of the Silicon Valley bank. UK arm of the bank has been rescued by HSBC. However, jitters remain across the UK financial sector.
The Bank of England has attempted to reassure the market, saying that the UK banking system remained safe found and well capitalised.
The euro is pushing higher versus the pound amid a risk-off mood in Europe and as investors look ahead to the ECB rate decision later this week.
Stocks across Europe are heading lower amid the ongoing fallout from the SVB collapse, even as US stock markets rebound.
The ECB is widely expected to raise interest rates by 50 basis points on Thursday, which would take the overnight lending rate to 3.5%.
The focus will be on what comes next? The market is expecting the terminal rate to be 4%, meaning that another 50 basis point hiker is expected in May.
There is no high impacting eurozone data to be released today, so sentiment will likely be tge key driver.
