UK: Weekly FX Market Update 18 May

GBP

• UK GDP has been picking up, with the potential to strengthen the pound under normal circumstances.

• However, the UK political situation saw a possible Burnham challenge to Prime Minister Starmer, which led to the pound dropping by 2 cents against the dollar last week.

• This week, we have UK CPI. Will it jump higher, prompting the market to price in three rate hikes in 2026 rather than two?

EUR

• The ECB reviews the jump in US inflation and urges caution over an ECB June rate hike.

• Will Eurozone Final Annual CPI rise above 3%?

• If it does, will investors look to buy EURUSD with interest rates possibly higher or sell EURUSD as they worry about the Eurozone hitting a period of stagflation?

USD

• Yearly US CPI hit 3.8% while Yearly PPI jumped to 6.0%, its highest level since 2022.

• So far, Bloomberg analysts haven’t priced in a rate hike for 2026, but could rampaging PPI ( and a steady labour market) force new Fed Chair Warsh’s hand to hike by December?

• FOMC meeting minutes are released on Wednesday evening. How will they frame the three hawkish dissents, and what could this mean for monetary policy?

• Trump says China agrees with his view on Iran. Will we see re-escalation here soon?

Mon May 18

10:00 EUR Economic Forecasts

Tue May 19

00:50 JPY Preliminary GDP

07:00 GBP Claimant Count Change/Average Earnings/Unemployment Rate

10:00 EUR Trade Balance

13:30 CAD CPI

15:00 USD Pending Home Sales

Wed May 20

07:00 GBP CPI

10:00 EUR Final CPI

19:00 USD FOMC Meeting Minutes

Thu May 21

02:30 AUD Employment Data

08:30 EUR German Flash Manufacturing/Services PMI

09:30 GBP Flash Manufacturing/Services PMI

13:30 USD Flash Manufacturing/Services PMI

Fri May 22

07:00 EUR German Final GDP

07:00 GBP Retail Sales/Public Sector Net Borrowing

13:30 CAD Retail Sales

15:00 USD Revised UoM Consumer Sentiment/Inflation Expectations