Central Banks’ Policy Signals and Economic Outlooks


Last week saw a dip in Sterling following the Bank of England’s decision to maintain interest rates at 5.25%, marking it the fifth consecutive meeting without a change. Markets interpreted this as a gradual shift towards a dovish stance by the BoE, notably as two policymakers, Catherine Mann and Jonathan Haskel (who previously advocated for rate hikes), joined the majority in favour of keeping rates the same.

Notably, the absence of any MPC member endorsing a rate hike for the first time since September 2021 caught attention. Only policymaker Swati Dhingra dissented, supporting a rate cut.

The shift towards a more dovish stance by the BoE naturally triggered a slight decline in Sterling, causing GBP|EUR and GBP|USD to dip to approximately 1.1650 and 1.2600, respectively. However, Sterling has since rebounded, currently resting at 1.1660 against the Euro and 1.2659 against the Dollar (at the time of writing).

In its monetary policy statement, the BoE acknowledged the positive movement in inflation but stopped short of signalling a rate cut, emphasising that the current conditions aren’t conducive to lowering rates. Expectations for rate cuts from August gained traction following comments by Governor Andrew Bailey, who hinted at the possibility of multiple cuts without specifying timing.

On the economic front, Bailey expressed optimism about the UK’s recovery from the technical recession experienced in the latter half of 2023. Thursday’s release of UK GDP figures will be closely monitored to assess whether the country can steer clear of further economic downturns.


The European Central Bank is leaning towards easing monetary policy, aiming to stimulate economic growth. ECB officials have indicated growing support for lowering interest rates as inflation gets closer to the ECB’s target. They believe that wages, an important factor for rate cuts, are showing signs of improvement.

While some ECB members have sounded more cautious recently, there are strong indications that the Bank is planning to cut rates this summer, with markets forecasting June. However, policymakers want to see more convincing evidence of wage growth and inflation trends before making a decision.

Inflation data for the eurozone is due in the coming weeks, and if there are no major surprises, markets are likely to become more confident about a rate cut in June. This could lead to the Euro lagging behind other currencies in the short term, especially those with negative bets or more sensitivity to market sentiment. This shift may happen within the next month.

Looking at the data calendar for the week, we anticipate the release of preliminary figures for Germany’s Consumer Price Index (CPI) later today. Tomorrow, attention will turn to the Eurozone’s Core Harmonized Index of Consumer Prices, followed by Retail Sales data for February scheduled for Friday.


Following last week’s interest rate decision and the dovish remarks from Federal Reserve Chair Jerome Powell, there’s been some confusion among US Federal Reserve members about interest rate cuts, with some calling for three cuts and others only one. Investors and speculators have been leaning towards a June rate hike.

This mixed messaging might make the Fed seem less reliable, especially as markets question its overall stance. As a result, the USD could see unpredictable movements.

While Durable Goods orders elicited some positive responses, the lack of support from consumer confidence tempered overall optimism. Investors and speculators are holding off on significant moves, awaiting further guidance from the Fed regarding interest rates and the US economic outlook.

Turning our attention to the upcoming data releases from the US, we are anticipating the Gross Domestic Product (GDP) report on Thursday, followed by Core Personal Consumption Expenditures data on Friday.

If you have an upcoming currency requirement and would like to hear more about what is affecting the markets in the coming weeks, please contact us on 020 3876 5432.