The pound has broken through $1.30 for the first time since November last year as expectations are that UK interest rates will remain above those of major currencies this year.
The pound rose 0.1% on Tuesday to $1.3001, also supported by the general weakness of the dollar amid concerns over US economic growth and uncertainties over the outlook for trade tariffs. The pound has risen nearly 4% this quarter.
The Bank of England is set to hold a meeting this week, with expectations that it will keep the interest rate at 4.5% unchanged, as rising inflation and geopolitical uncertainties favor a gradual easing of monetary policy. By the end of the year, traders expect the Bank of England to lower borrowing costs by 51 basis points, which is less than the 60 basis points expected by the Federal Reserve. The US central bank is also scheduled to hold a meeting this week, with expectations that it will keep the interest rate at 4.5% unchanged.
The divergence in policy outlooks is reflected in the bond market. The benchmark 10-year UK bond yield has reached its highest level relative to the US bond yield since the end of 2023, enhancing the appeal of the pound.
BNP Paribas strategists said that Germany’s fiscal spending might increase, which could push the yield on 10-year German government bonds to the level seen during the global financial crisis.
Sam Lynton-Brown, global head of macro strategy at BNP Paribas, said at a briefing on Tuesday that Germany’s plans to increase spending on defense and infrastructure are “game-changing” for the eurozone and markets. Germany is the largest economy in Europe.
He believes that by 2028, the yield on German government bonds could reach as high as 4%. Such fiscal spending might prompt the European Central Bank to start raising interest rates in the second half of next year. He said that these plans would mean “an increase in government bond supply, a significant rise in bond yields and a strengthening of the euro”.
The yen pared losses against the dollar as the Bank of Japan kept its policy rate steady and said a virtuous cycle of wages and prices was strengthening, while keeping an eye on the global trade situation. Last week, the yen hit a five-month high against the dollar.
Akira Okumori, chief global strategist at Mizuho Securities in Tokyo, said: “The central bank must maintain its hawkish stance on interest rates to prevent further depreciation of the yen, while managing the pace of rate adjustments and market expectations through clear communication.”
The Japanese yen has shown some signs of strengthening since the beginning of 2025, in sharp contrast to its four consecutive years of decline. However, the increasing uncertainties in the global economy and domestic politics may affect the timing of the Bank of Japan’s next move.
Technical analysis:
Gold: After breaking through the 3000 mark consecutively, the upward space has been opened, and it has broken through to above 3030. However, both bulls and bears are likely to wait for the Fed meeting tonight, so the further upward space may be temporarily limited. We suggest waiting for the liquidity at 3020/25 to be swept away before considering buying. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg.
Nasdaq: The overnight price movement was in line with the alerts from our plugin, but it didn’t fully reach the expected red liquidity level. For today’s trading session, we anticipate that the price movement might be volatile, but buying at the lower levels should still be attempted 1-2 times. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg.
Crude oil: After breaking above 68, the pullback failed to hold, and the demand zone of 67.30 – 67.65 failed. For today, continue to focus on testing the levels below 66 and buy on dips. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V:Hana-fgfg.
Today’s key financial data and events to focus on:
18:00 Eurozone February consumer price index final reading
02:00 US Federal Funds Rate Benchmark
At 2:30, Federal Reserve Chair Powell holds a press conference on monetary policy.
