Author: Terry Lovell (Head of Sales), Orbis Exchange

The Impact of Inflation and Interest Rates on Currency Markets- A Look at Recent Data Releases in the UK, Eurozone, and US

Market report - 20/02/23 - 24/02/23

Key Points:

  • CIPS Services PMI out in the UK
  • S & P Global Composite PMI out for the Eurozone
  • GDP figures out in the US


Last week we saw the UK’s CPI data being released, this saw a drop in inflation levels to 10.1%, this caused the biggest volatility for the pound as we saw quotes drop against both the EUR and USD as the banks predictions for inflation dropping could prevent future interest rate rises. We also had the unemployment rate released last week YOY, this saw no change to expectations and didn’t play a huge part in the Pound’s volatility last week. The Brexit agreements with the EU hit another barrier last week when we saw Northern Ireland not happy with items being checked at their ports before entering the Republic of Ireland. NI felt this undermined their position within the United Kingdom. This has amounted to pressure on the PM to fix this to ensure goods can be moved from Mainland UK to Ireland. He met with EU leaders this past weekend at the Munich Security conference to resolve the issue. An agreement is expected early this week. Also, this week we have the CIPS Services PMI being released, any reading above 50 signals expansion whereas below 50 shows contraction. Should we see a reading over 50 then this could have a positive effect on the Pound, if we see a reading below 50 then this could be bearish on the Pound.


Last week we saw GDP figures released for the entire Eurozone, this saw no change from the last set of results. The biggest movement the Euro saw last week is when the UK’s CPI data was released, this saw the Euro gain 0.5% against the GBP. The EUR had been expected to continue its strong performance from some analysts this week as we only have 1 piece of data coming out, the S & P Global composite PMI, this reports on the performance on manufacturing and the services industry within the Eurozone, if we see a reading above 50 then this shows Improvement, therefore it could have a positive effect on the Euro, but if we see a reading below 50, showing contraction, then this could be seen as negative for the EUR quotes.


Last week we saw the US CPI data being released, this saw a smaller than expected drop from 5.7% to 5.6%, this gave confidence that interest rates will continue to drop to ensure they can reach their inflation level target. Once the results were released the USD saw a pickup against both the GBP and EUR. We also had retail sales figures being released last week, this saw a huge jump from the previous week, from -1.1% to 3%, although this may seem like a good result, with inflation not dropping as much as wanted by the Fed, this means that an interest rate hike in March is likely. At the Munich security conference this weekend, the US has formally accused Russia of Crimes against humanity in Ukraine, this could see further advances in the War if the US find themselves involved. This week we have GDP figures being released, this is expected to see no change in these figures, but if we do see growth then this can be seen as USD Bullish, whereas if we see a drop then this could have a negative effect on USD quotes.