UK: Weekly FX Market Update 4 May

GBP

• The Bank of England holds rates steady with the pound gaining.

• Stephen Fisher, Professor of political sociology at Oxford University, predicts a possible net loss of 74% of Labour seats at the by-elections held this Thursday.

• If the government performs as badly as Fisher expects, could we see a leadership challenge? If Starmer and Reeves are replaced, will investors take flight?

EUR

• Eurozone headline inflation is 3%, and the highest since September 2023. Meanwhile, Real GDP only grew by 0.1% in Q1 2026. Is stagflation looming for the Eurozone?

• ECB Board member Nagel says that a June rate hike is appropriate if the outlook doesn’t markedly improve.

• Despite the weak outlook, EURUSD holds above an important-looking support level and gains on the ECB’s hawkish comments.

USD

• The Federal Reserve held rates steady last week, with three members turning hawkish, with Bloomberg analysts now suggesting that they won’t be any rate cuts for the US in 2026.

• Fed Chair Powell will serve as a Fed Governor 'for a period of time', helping to preserve the Federal Reserve’s independence. Could this give the dollar a lift?

• Meanwhile, the Bank of Japan sells USDJPY and says the US shares the same assessment as them.

• With the Straits of Hormuz still shut, continuing to push oil prices higher, will this encourage USD buying again?

• What will Friday’s employment report show?

Mon May 4

UK Bank Holiday

09:30 EUR Sentix Investor Confidence

Tue May 5

05:30 AUD Reserve Bank Australia Interest Rate Decision

13:30 USD Trade Balance

15:00 USD ISM Services PMI

Wed May 6

09:00 EUR Final Services PMI

09:30 GBP Final Services PMI

Thu May 7

09:30 GBP Construction PMI

13:30 USD Unemployment Claims

Fri May 8

00:30 CNY Trade Balance

07:00 EUR German Industrial Production

13:30 CAD Employment Change

13:30 USD Non-Farm Payrolls/Unemployment Rate/Average Hourly Earnings

15:00 Prelim UoM Consumer Sentiment/Prelim UoM Inflation Expectations