Forex Analysis & Reviews: 20.03.2023 - Banking crisis makes...

Live Chat

InstaForex - Official partner of Dragon Racing

This section features the most important information about trading with InstaForex. We provide both analysis from leading experts for experienced traders and articles on trading conditions for beginners. Our services will help increase your profit potential.

Become Trader

Account Opening

See also

Trading Conditions

Forex Analytics

Charts

This section is designed for those who are just starting their trading journey. InstaForex educational and analytical materials will meet your training needs. Our experts' recommendations will make your first steps to trading success simple and clear.

Start as Beginner

How to start trading

Useful information

Training and recordings

InstaForex innovative services are an essential element of productive investment. We strive to provide our clients with advanced technical capabilities and make their trading routine comfortable as we are recognized as the best broker in this regard.

Become Investor

PAMM System

ForexCopy System

Passive investments

OYS account

Partnership with InstaForex is beneficial and top-tier. Join our affiliate programs and enjoy bonuses, partner rewards, and the possibility to travel with the team of the world-renowned brand.

Become Partner

Main Page

Partner Area

Advantages for Affiliates

Registration

This section contains the most lucrative offers from InstaForex. Receive bonuses when topping up an account, compete with other traders, and get real prizes even when trading in a demo account.

All Promo Campaigns

Bonuses

Contests

Events

Holidays with InstaForex are not only pleasant but also useful. We offer a one-stop portal, numerous forums, and corporate blogs, where traders can exchange experiences and become successfully integrated into the Forex community.

Full details

Forums

We are in social networks

Forex humour

Forex Portal

InstaForex is an international brand created in 2007. The company provides services for online FX trading and is recognized as one of the world's leading brokers. We have won the trust of more than 7,000,000 retail traders, who have already appreciated our reliability and focus on innovations.

Learn More

History

Why Choose Us

InstaSport

Regulation

Company News

Awards

InstaForex Stars

InstaForex Offline

Headquarters

Key documents

Social Responsibility

InstaForex - Official partner of Dragon Racing

20.03.2023 11:26 AM

Banking crisis makes sterling look better than euro and U.S. dollar

The banking crisis has cast doubt on whether the Fed and other regulators will continue to raise rates to fight inflation or halt the monetary tightening cycle. The Bank of England is no exception. Despite higher inflation rates and average wages in the UK compared to the U.S. and the eurozone, the markets estimate the likelihood of a 25 bps increase in the repo rate to 4.25% or keeping it unchanged at the BoE meeting on March 23 as fifty-fifty.

Even before the U.S. bank failures, MPC members were divided on this issue. Bank of England Governor Andrew Bailey warned the markets against assuming that the BoE needs to do more at this stage. His colleague on the Committee, Catherine Mann, argued that monetary restriction had not yielded results and it was necessary to continue in the same spirit. The sooner, the better. The banking crisis may affect the worldview of central banks, which have to choose between suppressing high inflation and financial stability. That is why the March decision of the Bank of England is on a knife edge.

Estimated dynamics of the repo rate

The OECD is urging the central bank not to stop and take another step by increasing the cost of borrowing to 4.25%. They said it is not 2008, and the banking system is in a much stronger position now. Is it worth it to stop early? The ECB has proven that it isn't. Christine Lagarde and her colleagues set an example for other central banks by raising the deposit rate by 50 bps, and the Frenchwoman said at a press conference that European banks are as strong as granite.

If the ECB, with its proximity and ties to the troubled Credit Suisse, is not going to slow down the pace of monetary tightening, why should the BoE? The pound was faring better than the U.S. dollar and the euro in the week to March 17, proving that investors are less panicked about the state of the British banking system than its American and European counterparts.

Dynamics of Central Bank Rates

The slowdown in annual and two-year inflation expectations from 4.8% to 3.7% and from 3.4% to 3%, respectively, speaks in favor of keeping the repo rate at 4%. The former is the lowest since November 2021, while the latter is more than a year low.

The final verdict of the Bank of England will likely be influenced by statistics on February inflation, which will be released on March 21. Bloomberg experts expect a slowdown in consumer prices from 10.1% to 9.8% year-on-year. The growth rate of core inflation is likely to remain at 5.8%. Their decline will be a pleasant surprise for the BoE, increase the chances of completing the cycle of monetary policy tightening, and put pressure on the pound.

Technically, on the daily chart of GBPUSD, the rebound from the fair value and dynamic support in the form of moving averages allowed to increase the previously formed longs. The targets at 1.235 and 1.26 have not been canceled. The recommendation remains the same—buy.

You have already liked this post today

*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.