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Mixed US Data and BoJ Forecast Cuts Shape Market Sentiment

Yesterday we saw The US Dollar regain some strength against a number of currency pairs as PCE price index, which is the Federal Reserves preferred inflation measure came out stronger than expected for the first quarter. It should be noted however that this was overshadowed by GDP data which showed an unexpected decline in the first quarter, with many attributing this towards the uncertainty Trump’s policies have brought to the market.

The first major interest rate decision of May has taken place early this morning, with the Bank of Japan deciding to keep their rates on hold at 0.5%. We have however seen the Yen weaken as the central bank have moved to slash their forecasts for both economic growth and inflation throughout 2025. Members of the central bank now expect GDP growth of 0.4% – 0.6% growth as opposed to prior forecasts of 0.9% – 1.1%. Expectations for inflation were also trimmed due to concerns of a slowdown economically off the back of Trump’s tariffs.

These comments have now put more doubt in play for when The Bank of Japan will move to increase interest rates, with a June or July hike now falling further away.

Moving onto economic data releases today, we have a basket of UK data releases centred around Mortgage Approvals and Net Lending which are both due to come in lower than previous. It shouldn’t be a surprise when considering the economic picture we face right now, and the uncertainty surrounding the tariffs and rises in National Insurance etc..

This afternoon the data releases are more US based, with both continuing claims and jobless claims due to increase from previous figures. If the release comes out as expected, it will tie in with yesterday’s ADP Employment figures which also showed a drop in job creations, which in the medium term will weigh heavy on The Dollar. Again, this shouldn’t be a surprise, as we know the medium-long term effects of Trump’s Tariffs is potential job losses when consumers potentially refuse to buy certain goods with the price increases expected.

GBP/EUR 1.1757 GBP/USD 1.3312 GBP/AED 4.8936
GBP/AUD 2.0864 GBP/CHF 1.1002 GBP/CAD 1.8397
GBP/NZD 2.2474 EUR/USD 1.1310 GBP/ZAR 24.8679

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