30th May

Top Currency Pairs Tuesday 30th May 04:00 UTC GBP/USD: 1.23489 (Last Week: 1.24590) EUR/USD: 1.07062 (Last Week: 1.08212) GBP/EUR: 1.15343 (Last Week: 1.15135)

Market News

Pound Sterling The British Pound stabilised and pared away some of its recent losses as a sense of calmness and stability returned to the government bond market. Sterling's losses were initially catalysed by a rout in the UK government bond market after April inflation figures led to a significant upward revision to market expectations for the Bank of England’s rate hike path. In fact, financial markets have priced in an additional three rate increases from the Bank of England following last week’s data release. Looking forward, the British pound seems poised to follow international headlines and price dynamics in what will be a quiet week in the UK economic calendar.

Euro

The Euro is currently experiencing widespread losses and depreciation, which is having an impact on its pairs against G10 currencies. Market participants are awaiting ECB President Lagarde's upcoming speech and German inflation data scheduled for tomorrow for possible developments that could provide clarity and influence the market's direction. In fact, Destatis will release inflation figures from Germany which are expected to have further decelerated in May. In that sense, the inflationary figures for the biggest economic block from the Eurozone may have an impact on the Euro against major currency counterparts. Ultimately, the single currency could benefit if inflation data out in Europe over the course of today, tomorrow and Thursday come in even remotely similar to that released in UK last week where domestically-generated inflation accelerated notably when it had been expected to fall.

U.S. Dollar The U.S. dollar climbed higher in early European trade this morning, remaining close to a two-month peak, as traders digested the potential for more Federal Reserve interest rate hikes as well as the passage of the U.S. debt ceiling deal through a divided Congress. U.S. President Joe Biden and top congressional Republican Kevin McCarthy reached an agreement over the weekend to suspend the debt ceiling until 2025 and cap some federal spending in order to prevent a U.S. debt default. This deal now has a limited amount of time to make its way through a narrowly divided Congress before the U.S. Treasury runs short of money to cover all its obligations and is sure to face opposition from the extreme sides of both parties. Ultimately, the dollar remained firm yesterday, when both the U.S. and U.K. markets were closed, and is on course to register a monthly gain of just under 2.5% as traders’ position for the potential that U.S. interest rates remain higher for longer.

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