04/03 – All eyes on the Fed as Powell sets course for risk

04/03 – All eyes on the Fed as Powell sets course for risk

GBP: Budget will see taxes increase in coming years

EUR: Is that good news I see?

USD: Powell speech just after 5pm


There was little in markets from the Budget yesterday with although continued spending now and delayed taxes is certainly a more supportive environment for the pound than the opposite.

We have long said that in a post-Brexit, post-Covid environment that investment is crucial to the ongoing growth of the UK economy. Business investment has been on a downward trajectory for many years and we hope that the ‘super deduction’ allows for businesses to turbo-charge their plans for investment in both capital and people in the coming two years.

For their employees, the extension of the furlough scheme will help as will aid for house purchases and mortgage guarantees but, even if you do not earn enough to pay tax on income, inflation and the suspension of tax thresholds will make consumers poorer in real terms.

News that the UK has reneged on part of the Brexit deal has also weakened sterling. The UK announced last night that it will suspend the need on customs documentation on food entering Northern Ireland until October. The deadline had originally been set at the end of March.

Sterling will continue to trade on risk today with Fed Chair Jerome Powell’s speech the key note there.


European PMIs yesterday were not enough to stimulate a rally in the single currency and the combination of a solid if unspectacular budget in the UK and sliding risk appetite helping the USD means that both EURGBP and EURUSD are both a shade lower this morning.

Retail sales and employment figures at 10am will be looked through given the lockdowns and support schemes in place throughout the Eurozone.

A crumb of EUR hope comes from Germany announcing a path out of lockdown alongside expected improvements in vaccine supply in April. Q1 may have been tough for the single currency but Q2 may be the time that the differential is closed.

US dollar

With the dollar starting the day at close to a one-month high ahead of the Fed Chair’s speech this afternoon, there is little surprise that markets are unsure as to the path of risk moving forward. We have no doubts as to the Fed Chair’s expected language – an attempt to sooth markets, allowing risk to push higher and interest rate expectations to remain low – it’s simply a matter of how much markets will listen to him, and not try and take the Fed on.

US equity markets ended the day soggily yesterday with tech shares in particular taking a nose dive. That weakness has translated into Asia and Europe this morning so, ahead of the speech at 5.05pm GMT, we don’t expect the USD to weaken much before then.


The Japanese yen did not break above 150.00 in GBPJPY terms yesterday but if the Powell speech later sets the horses running either way, it will likely set the tone for risk into the next Fed meeting on March 16-17th.

Market rates

Today’s interbank rates at 08:24 against sterling. Movement vs yesterday.

Euro€1.157 ↑
US dollar$1.395 ↓
Australian dollar$1.787 ↑
South African randR20.99 ↑
Japanese yen¥149.5 ↑

Have a great day everyone.

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.