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

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