Tag Archives: foreignexchange

This morning, the pound euro sits at a 34-month high!

The gains come on the back of Fridays strong U.S. job report, which lowered the odds of a U.S. rate cut.

Following the development on Friday, it also lowered the odds of a UK rate cut boosting the pound.

Last week the euro weakened off following the decision by the ECB to cut interest rates.

Tomorrow for the UK we have the employment figures that will be closely watched followed by Wednesday’s Industrial production and Growth figures.

Markets will be looking for a 0.1 percent month-on-month rise in April. Should this come in lower than expected, we could see the pound lose some of its gains.

t’s a big week for the UK in terms of data that will be closely watched by the MPC.

Elsewhere, French President Emmanuel Macron has called a snap parliamentary election, after the far right surged in the European election this weekend.

This news has further weakened the euro.

In terms of data, it is a quiet week in the eurozone with no major events on the calendar.

As expected, the ECB cut its benchmark interest rates by 25 basis points yesterday.

Meanwhile, the post-meeting statement and press conference offered little clarity on the rate outlook. Indeed, the ECB stated that it is still data reliant and has not committed to any certain rate path.

Meanwhile, updated inflation predictions were moderately higher for this year and 2025. Because the policy decision was consistent with expectations and the ECB remained in data dependent mode, the impact on markets was modest yesterday.

On the currency front, the major FX pairings remained range bound. However, a break above this level could not be sustained. 

The primary focus today will be the May US labour market data. The job market remains tight, despite recent softening. 

The forecast is expecting payrolls to increase by 185k this month, while the unemployment rate is projected to remain at 3.9%. Meantime, average earnings growth is expected to stay at +3.9% year on year in May. In the Eurozone, the third GDP report is expected to confirm a 0.3% expansion in the first quarter.

This morning, a flurry of European economic data has already been released. German industrial figures showed a downturn in new purchase orders that came in below the market consensus for the fourth consecutive month at -0.2 percent (forecasted 0.5 percent).

Todays most crucial economic event is the European Central Bank monetary policy announcement, which will be closely monitored by investors.

Markets are expecting the ECB cut interest rates before the Federal Reserve and the Bank of England, investors have priced in a 25-basis point cut to reduce the headline rate to 4.25 percent.

ECB President Lagarde’s speech will be carefully watched to see her outlook on when the next rate cut will be, however future wage data and inflation figures could shift her decision.

Elsewhere in the European Union, the change in the value of all goods sold is expected to fall -0.3 percent in April. This forecast further supports the ECB’s decision to reduce rates.

GBPEUR has been fairly flat in the build up to the ECB interest rate decision today. This week Pound to Euro has been trading in a tight 40-point range struggling to find any volatility, this is expected to change later on today after the ECB refinance rates.

Overnight, Prime Minister Rish Sunak reminded the country that he is still in the race by overcoming his rival Keir Starmer in the first election debate.

A post-debate YouGov poll found Sunak to be the better performer by 51-49%, as he went on the attack and strengthened the Conservatives message to the people. Starmer did not appear to appreciate the format and was somewhat flustered by Sunak’s strategy of pressuring Labour for details on its solutions to the country’s number of issues.

Looking ahead to the next day, the US non-manufacturing ISM for May will be the primary data focus. It is predicted that the index will return to expanding territory, increasing to 50.8 from 49.4. Producer price inflation for April is expected throughout the Eurozone. 

For the remainder of the week the European Central Bank’s decision on Thursday is all but certain to be the first major central bank to cut interest rates as it shrugs off a rise in inflation and takes a different path in monetary policy from the UK and US.

Markets and ECB officials are highly confident that the central bank will lower its benchmark deposit rate by 25 basis points from a record high of four percent tomorrow. Combined with Friday’s US job report, these are the main highlights, However, keep an eye on polls, as volatility may increase if the outcome is less certain.