UK: Weekly FX Market Update 7 May

CalendarMay 7, 2024
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GBP

  • The Tory party narrowly avoided their worst fears regarding the by-elections. Will we now see a period of political stability and some rest bite for PM Sunak?

  • The Bank of England sets rates this Thursday with Bloomberg analysts currently forecasting a rate cut from the BoE in September. With this in mind, how dovish will the Bank be this week?

  • The week ends with the release of UK GDP on Friday.

EUR

  • The ECB continues to highlight a possible June rate cut, however, further cuts aren’t guaranteed.

  • Greek ECB Governing Council member Stournaras says ‘we now consider three rate cuts in 2024 as the more likely scenario’. While ECB Economist Lane says ‘we are not pre-committing to a particular rate path’. Who will win the debate?

  • With a lack of Eurozone data for release this week, the Euro could be moved by other currency themes.

USD

  • Recent utterings by various Fed Presidents outlined a ‘higher for longer’ stance on interest rates, a consequence of sticky inflation, with Bloomberg analysts forecasting only one US rate cut in Q4.

  • However, on Friday, Non-Farm Payrolls weakened, and the market subsequently priced in a first rate cut in September, another by year end and three cuts in 2025.

  • As a result of the above, the US Dollar index moved slowly lower, losing 1% on the week.


Main events for this week:

Mon May 6

UK Bank Holiday

Tue May 7

05:30 AUD Reserve Bank of Australia Interest Rate Decision/Statement

09:30 Construction PMI

Wed May 8

No Top Tier data

Thu May 9

12:00 GBP BoE Monetary Policy Report

12:30 GBP BoE Gov Bailey Speaks

Fri May 10

07:00 GBP GDP

15:00 USD Prelim 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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