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Market Update

• Posted by currencies in Bank of England, Currency, Dollar, Economy, EUR, Fed, GBP, Inflation, Rate Cuts, Sterling, UK, Uncategorised
• May 20, 2024
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Last week was constructive for Sterling exchange rates with GBPEUR ending the week at 1.1685, and GBPUSD ending the week at 1.27. EURUSD was also bullish last week closing on Friday at 1.0870.

As we enter a new week, there are different data releases to focus on which could shift the mood as far as exchange rates are concerned,  on Monday we have a relatively quiet day but we do have a few speeches, the most noteworthy being from BoE’s Broadbent and Barr, Waller and Jefferson of the Fed. Right now markets are watching these speeches with a keen eye for any clues as to if members are swaying towards rate cuts, it seems both Central Banks are slowly getting there now.

On Tuesday we begin the day with a speech from Treasury Secretary Janet Yellen, and though she is not a part of the Fed and can give any clues on rate cuts, her speech may give us an idea of where the U.S. government is going as far as fiscal policy is concerned- this will then be followed by more Fed speeches and similarly to Monday, we will be looking for any hints about rate cuts over the coming months to dictate where the market goes next.

Wednesday is probably the most important day this week if you are trading Sterling, we have UK inflation data out in the morning where we are expecting Core inflation to drop to 3.7% and the inflation rate to drop to 2.1%- this is awfully close to the BoE target so this could weaken the Pound as this would mean that cuts are expected soon, the BoE expectation is that inflation will rise again, however at this point it looks like the BoE is looking for reasons to do a rate cut, not the opposite, so future projections on inflation may not make a difference here.Later on Wednesday we have the FOMC minutes which we will be watching to see if there are any changes to Fed Chair Powell’s previous testimony.

On Thursday we have flash PMI’s from Europe, UK and the U.S- we are expecting a mixed release and the main point to consider is that flash PMI’s are just predictions, so unless we see a massive swing we may not see much movement on the markets following these releases. Lastly, on Friday we have UK retail sales numbers where we are looking for a positive number to strengthen Sterling, anything weak will push the Pound lower into the weekend- this could be expected due to bad weather in April.