Tag Archives: USD

Today there is no UK economic data being released, therefore attention will shift to policymakers’ speeches from the European Central Bank and French CPI inflation figures.

In the European Union, French EU Harmonized CPI released below the market consensus (2.7 percent) at 2.6 percent.

Investors will keep a close eye on the speeches from the ECB policymakers today, to gauge a better understanding on future rate cuts after they reduced interest rates by 25 basis points to 4.25 percent during last week’s monetary policy meeting.

Following the European Central Bank’s decision to cut interest rates last week and the political uncertainty in the Eurozone, it has boosted GBPEUR to find a resistance level and move to a 22-month high.

This presents a great opportunity to fix any euro exposure and ‘hedge’ to protect yourself against any adverse market movements and minimise risk exposure.

Pound Sterling has been volatile against the Dollar over the last few days. On Wednesday, US CPI inflation released below the market expectation at 3.3 percent resulting in GBPUSD moving to a 10-month high however the dollar has recouped most of its losses this morning.

The lack of UK economic data has resulted in Pound Sterling being one of the best performing currencies in the G10 this week.

Yesterday’s events left the markets with a lot to process. The announcement of the US CPI inflation figures for May caused a notable market reaction ahead of the Fed’s policy decision. In comparison to the 3.4% and 3.5% forecast, the headline and core rates dropped to 3.3% and 3.4%, respectively. 

The Federal Reserve kept interest rates at a 23-year high on Wednesday, as anticipated, as its fight to reduce inflation continues well into 2024.

The news comes after the central bank’s monetary policy committee met for two days and increased borrowing rates from almost zero percent in March 2022 to a range of 5.25 percent to 5.5 percent due to the rapid rise in pandemic-induced inflation.

The Fed has voiced concern that the economy is still too hot, the labour market is still too robust, and prices are rising too quickly to begin reducing rates, even though inflation has significantly decreased from its 9 percent peak two years ago. 

The central bank noted that it will need to see more progress on inflation before it will drop rates, The meeting’s overall tone was a little bit hawkish.

Looking ahead to today, the primary release of interest will be the April industrial production data for the Eurozone. For the month, a slight 0.2% increase in output is anticipated. The most recent weekly initial unemployment claims data from the US will be displayed.

The UK has released employment reports nice and early this morning, and it has revealed that regular pay growth has come in unchanged at 6.0 percent. The latest news means that the likelihood of a rate cut before the general election has been diminished.

Following this morning’s release, the pound has continued to hold its strength against both the euro and the dollar, with only a slight decline in the current market rates.

Looking ahead this week, in the UK the release Growth Domestic Product (GDP) will be closely watched. Growth in the UK month on month is expected to fall to 0 percent (from 0.4 percent).

Also set to be released is the Industrial Production in the Manufacturing sector, whereby markets are expecting a decline of 0.5 percent to -0.2 percent.

Markets will then shift their focus to the US later in the week to the Consumer Price Index, which will be closely watched as the FED continue to hold their hawkish stance on any potential rate cuts.

The FED will then announce their Interest Rate decision on Wednesday evening, which is widely expected to hold steady at 5.5 percent.

The recent news of President Macron’ss election call and PM Alexander De Croo’s resignation, has caused some economic uncertainty in the Eurozone.

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.