UK: Weekly FX Market Update 22 April

CalendarApril 22, 2024
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GBP
  • Despite a stronger than expected CPI print, Sterling struggled to rally last week.

  • BoE Governor Bailey said that he expects a strong drop in May for inflation.

  • Over the past few weeks, the pound has fallen quickly, even when there hasn’t been any sterling news.

  • The FT now reports that if the May 2nd local elections produce a ‘crushing defeat’ for the Tories, instead of facing a humiliating vote of no confidence from his party, PM Sunak could call a general election in June.

  • Could this be the reason why sterling has been so weak?

  • Purchasing Managers Index data released on Tuesday is the top UK economic data release next week.

EUR
  • Eurozone Final CPI is 2.4%, close to the ECB’s 2% target, and producing some internal ECB debate over when to cut rates.

  • Portuguese ECB Centeno said that it is ‘about time’ to change monetary policy. While Latvian ECB Kazaks said that it is too soon to declare victory over inflation and that it would be ‘very tricky’ to start hiking rates in the middle of a rate cutting cycle.

  • Lithuanian ECB Simkus chimed in saying that the ECB could make back-to-back rate cuts in June and July should disinflation be stronger than expected.

  • The influential IFO Business Climate index is released on Wednesday.

USD
  • The US dollar had a good week as Fed Chair Powell made it clear that the new Fed mantra on interest rates was ‘higher for longer’. US yields pushed higher again and supported the Greenback.

  • Fed President Bostic said that if ‘inflation starts moving in the opposite direction away from our target 'I’d have to be open to increasing rates.’ Fed President Kashkari added that rates could ‘potentially’ be kept steady this year.

  • Can the GDP and Personal Consumption Expenditure releases on Thursday and Friday keep the US dollar on the front foot?


Main events for this week:

Mon Apr 22

No Top Tier Data

Tues Apr 23

09:00 EUR Flash Manufacturing & Services PMI

09:30 GBP Flash Manufacturing & Services PMI

14:45 USD Flash Manufacturing & Services PMI

Wed Apr 24

02:30 AUD CPI

09:00 EUR German IFO Business Climate

13:30 USD Durable Goods

Thu Apr 25

13:30 USD Advance GDP/Unemployment Claims

15:00 USD Pending Home Sales

Fri Apr 26

00:01 JPY BoJ Policy Rate/Statement/Outlook Report

00:02 JPY BoJ Press Conference

13:30 USD Core PCE Price Index

15:00 USD Revised UoM Consumer Sentiment.

Author

Trevor Charsley

Trevor Charsley

Senior Market Strategist

Trevor has over 25 years' trading and sales experience. He produces regular market and technical analysis as well as help with the structure and management of FX hedging policies. Trevor is often listed among the top "currency forecaster on Bloomberg".

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