As another turbulent week in the currency markets comes to an end let’s look at the events that dominated this week and how it impacted currency movements.
In the UK the market was eagerly anticipating the release of the Spring Budget. Chancellor of the Exchequer, Jeremy Hunt said:
“Our plan is working – inflation is falling, debt is down and a growing economy. Britain is on a lasting path to growth with a revolution in childcare support, the biggest ever employment package and the best investment incentives in Europe.”
There was some positive sentiment from the budget but what really dominated this week’s trends was the fallout from the insolvency of Silicon Valley Bank, followed two days later by the failure of New York’s Signature Bank. Europe’s financial regulators are furious at the handling of the SVB collapse, privately accusing US authorities of tearing up a rule book for failed banks that they had helped to write. Authorities stepped in to guarantee deposits beyond normal limits in an effort to head off further runs on bank deposits and to avoid a contagion effect, but financial markets have remained nervous.
To compound the SVB situation, and potentially significantly more worrying, was the news that Credit Suisse would borrow up to 50 billion Swiss francs ($54 billion) from the SNB to stabilise its dramatically falling share price which fell by as much as 30% on Wednesday.
How did this impact the currency markets?
As you can probably imagine it was an extremely volatile week. EUR/USD fell 2% on Wednesday following the news of Credit Suisse, with a significant drive out of the Euro. This impacted GBP/EUR which rallied from a weekly low of 1.1275 to a peak of 1.1466 – a difference of £3k on a €200k money transfer.
Similar movements were seen against the USD with EUR/USD falling from highs of 1.0755 to 1.0525 but has rebounded to 1.0650 this morning. GBP/USD was also on the move falling to 1.2015 on Wednesday but has rallied back close to six week highs this morning to reach 1.2165.
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