After a few quiet weeks in the FX market, things have sprung back into life the past few days with major currency pairs breaking out of their recent ranges. Sterling has been one of the biggest winners of these moves.

A move out of the USD earlier this week was triggered by Fed Chair Powell’s semi-annual testimony to Congress. He noted that lower rates ‘would likely be appropriate this year’ should the US economy evolve as expected, which has seemingly pushed investors to believe that a June interest rate cut is now firmly on the cards. Coupled with some weaker US services sector and jobless claims data, the USD has remained on the backfoot as the week has progressed.

In other news, the Pound took this week’s UK Spring Budget in its stride, as no real surprises were announced, but it still managed to rally to its strongest position against the dollar so far this year, as investors sold the USD en masse. The latest growth forecasts from the OBR also provided some reason for cautious optimism, with modest growth of 0.8% seen in 2024 before expansion accelerates to 1.9% in 2025, which gave investors further reason to buy into Sterling.

As a result, the GBP/USD has pushed up around 2-cents in the past week and currently trades around a 7-month high. The GBP/EUR has moved up around 0.7% this week and trades at a 3-week high but not far from the top end of where it’s traded since August 2022. Eyes will now turn to this afternoon’s non-farm payroll report which might dictate how the USD fairs over the coming week.

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