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30th May - Weekly FX Update

Top Currency Pairs Monday 30th May 9:00 UTC GBP/USD: 1.26297 (Last Week: 1.25686) EUR/USD: 1.07619 (Last Week: 1.06457) GBP/EUR: 1.17356 (Last Week: 1.18063)

Market News

Pound Sterling The Pound was a mixed bag last week. On the downside, UK PM Boris Johnson remains under serious pressure after the report on "Party Gate" was released, resulting in calls for a vote of no confidence which would add a dose of volatility and disrupt any short-term strength. PMI numbers were also weak, flagging a sharp slowdown in the services sector. On a more positive note, Rishi Sunak announced a new government spending package to support households, which saw the Pound achieve a second weekly rise against the US Dollar, now trading at a monthly high. If the Bank of England can become more optimistic in its growth outlook, with a dulled prospect of a recession, they could lift interest rates further than expected which would be a massive boost for the Pound. The UK is nearing a four-day weekend commencing Thursday, leaving the currency vulnerable to other drivers at the end of the week, notably Friday's US non-farm payroll report.

Euro Today will see German inflation figures released, with an expected fall to 7.3% year on year. A higher number may benefit the Euro as it would pressure the European Central Bank (ECB) to raise interest rates in the Eurozone faster, but the ECB would likely stay on track with their current plan. Christine Lagarde has signalled two quarter-point increases in July and September, but some policymakers are eager for a half-point move. French inflation and German unemployment will be released tomorrow, which combined with German inflation today could hold some sway over the next interest rate moves.

U.S. Dollar Today is Memorial Day in the US, so USD orders will settle on 31st May. The Dollar's recent rally is wavering as the currency saw its biggest weekly drop in almost four months. There are a few contributing factors including reduced rate hike expectations after the US central bank indicated during the FOMC minutes it may slow, or even pause tightening this year. Besides global risk sentiment, recent gains for the USD were largely down to aggressive rate hike expectations so the market did not react kindly to a more dovish Federal Reserve. Declining treasury yields and softer data also contributed to a weaker Dollar. Non-farm payroll report will be released Friday, and the Dollar may put some pressure on the Pound as the UK markets close Thursday and Friday for the Queen's Platinum Jubilee.

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