23rd May - Weekly FX Update

Top Currency Pairs Monday 23rd May 9:00 UTC GBP/USD: 1.25686 (Last Week: 1.22315) EUR/USD: 1.06457 (Last Week: 1.04329) GBP/EUR: 1.18063 (Last Week: 1.17240)

Market News

Pound Sterling The Pound achieved its biggest weekly gain against the US dollar last week since December 2020, despite inflation rising to the highest level in more than 40 years. This has come after robust jobs market numbers and better than expected retail sales data gave the UK currency some tailwind, as the rate lifted above the 1.25 benchmark. There was also some more risk-tolerant trading, as the Chinese economy has begun to recover, pushing the Dollar down. This week's UK economic calendar is sparse, so the Pound will look to geopolitical factors to consolidate, most notably a further rebound of the Chinese economy and currency.

Euro Last week, European Central Bank (ECB) policymakers indicated they are becoming increasingly minded to lift Eurozone interest rates, supporting the Euro as this seems to be a general trend as we head towards Q3. Christine Lagarde stated that the conditions facing monetary policy have "changed markedly" and that a rate lift in July would be "in line with our forward guidance". This gave the Euro some strength, rising sharply against the Dollar. Looking ahead, this week's Eurozone economic calendar opens with German IFO business sentiment data, with the index expected to dip to 91.4. The Euro however, similar to the Pound, will be very reliant upon a further rebound in the Chinese economy.

U.S. Dollar The Dollar has fallen against other G10 currencies as the Chinese Renminbi rebounded from a heavily sold position. Some support measures for the Chinese economy have provided stability, offering the FX markets a period of consolidation. This however is considered a pause, rather than an end to the Dollar's bullish trend. Looking ahead, a host of important data sets are scheduled for release in the US this week, most notably jobless claims and GDP numbers on Thursday. FOMC minutes are also published on Wednesday, and the markets will be watching very closely for rate hike signals after the Federal Reserve lifted borrowing costs by 50bps this month.

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