UK: Weekly FX Market Update 22 May
The pound had a mixed week, gaining against the euro but slipping against the US dollar.
The fall in GBPUSD could be attributed to comments made by BoE Governor Bailey, stating that inflation will fall sharply in the coming months, highlighting the decline in energy prices, though he also added that concerns remain about high food prices.
UK CPI for April is released on Wednesday, with forecasts of a drop from 10.1%, to between 9.5% and 8% - to what extent could this weaken the pound?
Retail sales round the week off. Did the UK shopper cut spending, just as it did last month?
EURUSD has fallen 2% over the past two weeks, despite reports that another ECB rate hike could happen in September.
ECB President Lagarde pleased the hawks by saying that the ECB is at a key juncture as it needs sustainably high rates, however, the euro also weakened against the pound.
Despite Eurozone CPI still growing annually by 7%, Bloomberg forecasts suggests that the ECB will hike just once more - could this be the driver behind the recent euro weakness?
The market bought US Dollars last week as positive news emerged from Congress over the Budget deficit ceiling. However, late on Friday, the GOP debt negotiators walked out of discussions, with head negotiator Graves saying that the debt limit talks were ‘at a pause’.
The US regional banking sector had its biggest one-day rally of the past two years. This was prior to US Treasury Secretary Yellen saying on Friday that 'more bank mergers may be necessary’.
Whilst Fed Chair Powell opened the door to a possible US rate pause in June, it was slammed shut by Fed presidents Mester, Barkin and Logan, with the latter saying that she doesn’t yet see a case for a pause amid high prices.
FOMC meeting minutes are released on Wednesday. How dovish will they be?
Preliminary GDP is released on Thursday. How strong is the US economy?
Events for the week ahead:
Mon May 22
All Day Canadian Bank Holiday
15:00 EUR Consumer Confidence
Tue May 23
07:00 GBP Public Sector Net Borrowing
09:00 EUR Flash Manufacturing & Services PMI
09:30 GBP Flash Manufacturing & Services PMI
14:45 USD Flash Manufacturing & Services PMI
Wed May 24
03:00 NZD Interest Rate Decision
04:00 NZD RBNZ Press Conference
07:00 GBP CPI
09:00 EUR German IFO Business Climate
19:00 USD FOMC Meeting Minutes
Thu May 25
13:30 USD Prelim GDP QoQ
Fri May 26
02:30 AUD Retail Sales
07:00 GBP Retail Sales
13:30 USD Core Personal Consumption Expenditure Index/Durable Goods/Goods Trade Balance
15:00 USD Revised Uni of Michigan Consumer Sentiment