22nd May

Top Currency Pairs Monday 22nd May 04:00 UTC GBP/USD: 1.24590 (Last Week: 1.24588) EUR/USD: 1.08212 (Last Week: 1.08606) GBP/EUR: 1.15135 (Last Week: 1.14716) Market News

Pound Sterling The British Pound struggled to push higher last week as gains were limited by variable sentiment regarding the Bank of England’s outlook ahead. Looking forward, UK inflation figures, due on Wednesday, are expected to ease but big rises in food prices may mean the overall number retreats more slowly than had been hoped. Inflation is expected to have fallen back into single figures in April, with economists on average expecting the consumer price index to fall to 8.3%as the effects of energy price hikes a year ago drop out of the data. However, soaring food prices are, according to the Resolution Foundation, overtaking energy prices as the biggest driving force of inflation and may result in inflation not coming down as fast as expected.

Euro

European stock markets are expected to open the week in a cautious manner, as negotiations surrounding the potential raising of the U.S. debt ceiling continue. In fact, activity is likely to be limited as investors await more news from Washington with negotiations to avoid a U.S. default, which would have a disastrous impact on the global economy, set to continue. Looking forward, Europe's macro calendar is fairly light today, with May eurozone consumer confidence data and speeches from European Central Bank officials Luis de Guindos and Philip Lane the main highlights. These policy-makers are likely to point to further hikes ahead by the ECB after President Christine Lagarde stated on Friday that the central bank needs to keep interest rates high to curb inflation in the medium term.

U.S. Dollar The U.S. dollar wobbled in early European trade this morning amid uncertainty surrounding the U.S. debt ceiling negotiations and after dovish comments from Fed chair Jerome Powell. Looking forward, investors now await a key meeting between U.S. President Joe Biden and House Republican Speaker Kevin McCarthy to discuss the debt ceiling later today. Negotiations between the two sides broke off suddenly on Friday with Republican negotiators walking out of the meeting. Although talks eventually resumed, neither side cited any progress, leaving the Dollar directionless. Ultimately, the dollar index was little changed at 103.07, hovering well back from the high of 103.63 last week, a level last seen on March 20th.

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