His palms are sweaty, knees weak, arms are heavy

Market reports
Thanim Islam
  • Markets braced for Governor Bailey
  • ECB set the hawkish beat for Sintra
  • US consumer confidence highest since January 2022


The EUR climbed for the second day as ECB President, speaking in Sintra for the annual ECB forum, reiterated that the ECB won’t declare the end of its historic interest rate hiking cycle anytime soon. No change by money markets on rate expectations, but nonetheless the data supported the currency.

Solid data points from the US bizarrely failed to lift USD yesterday as currency markets opted to go with the more broader "risk on theme" that saw European equities break a 6-day losing streak. Durable goods orders and existing home sales came in a lot higher than expected, and consumer confidence rose to the highest in 17 months, illustrating the optimism of the US economy. The data suggests that a recession in the US may come later than what previously had been expected.

Despite higher gilt yields, GBP eased versus the euro as recessionary worries begin to filter into sterling.

Inflation in Canada overall eased with the core CPI number coming in marginally lower than expected. GBPCAD gained as a result but money markets still price in peak interest rates in Canada of 5.12%.


Market rates

* Daily move - against G10 rates at 7:30am, 28.06.23

** Indicative rates - interbank rates at 7:30am, 28.06.23

Data points


  • GBP – BoE Bailey and Pill
  • JPY – Governor Ueda
  • EUR – ECB Lagarde, Lane
  • USD – Fed Chair Powell

Our thoughts

Focus today will mainly fall on comments made by central bankers over in Sintra, Portugal at the ECB Forum. Yesterday’s comments from Christine Lagarde continued to have a hawkish tone, and we would expect Fed Chair Powell to follow suit, so no big surprises there. However, Governor Bailey and Chief Economist Huw Pill's comments will be more in focus following last week's interest rate decision. Dovish BoE member Dhingra commented yesterday that she sees promising signs of inflation easing, following recent PPI number showing prices dropping at a production level, and yesterday's report from the BRC about falling prices in inflation will bring her some solace as well. So, what will Bailey and Pill say? Any pushback on the aggressive expectations for seeing peak rates at 6.25% should be negative for GBP.

Italy’s inflation numbers will be looked at as well, and whether it continues to support the hawkish narrative of the ECB.

Chart of the day

All eyes on Governor Bailey and Chief Economist Huw Pill today over in Portugal. There have been some calls in the market that the correlation between future rate expectations and GBP could be decoupling, with the index dropping in recent days whilst rate expectations have continued to climb. Markets seem tentative to drive GBP higher at the moment until Governor Bailey is heard. His words will be closely scrutinised today.

Source: Bloomberg Finance L.P.

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