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Foreign Exchange Analysis ~ 20 May 2024


GB Pound

What happened last week?

 Last week saw Cable trade higher on the back of improved risk sentiment.

 

What to watch for in the short-term?

 Last week’s US inflation data elicited a GBPUSD rally. Therefore, Sterling goes into this week potentially facing a downside risk and a retracement of last week’s gains.

 

Furthermore, UK CPI data on Wednesday will arguably be the biggest determinant in the direction Sterling moves over the coming weeks. With bets split between a June or August BoE cut, hot inflation figures (particularly in the services sector) could put the last nail in the coffin for a UK rate cut next month.

 

What about the coming months? Irrespective of whether we see a rate cut in June’s meeting, the accompanying BoE minutes should provide insight into what criteria the central bank will be monitoring over the second half of the year to ease monetary policy.

 

Calendar

Wednesday 7am | CPI (Apr)

Thursday 9.30am | PMI (May Preliminary)



US Dollar

What happened last week?

 Although PPI and CPI data came inline with expectations, markets were quick to react causing a selloff of USD.


What to watch for in the short-term?

 We see last week’s dollar price action to be somewhat rash following the rather unimpressive data out of America last week. Therefore, dollar volatility will likely continue to calm in the near term.


What about the coming months?

↑ All eyes look toward Europe and America’s interest rate announcements in June. If the Fed mentions cuts on the horizon we could see Dollar weakness through the summer months.


Calendar

Wednesday 7pm | FOMC Minutes

Thursday 2.45pm | PMI (May Preliminary)


Euro

What happened last week?

 Europe’s GDP and HICP data failed to surprise markets last week causing a mild sterling appreciation against the Euro.

 

What to watch for in the short-term?

 Next weeks CPI data will be Europe’s final inflation readings ahead of the all-important interest rate announcement on June 6th. While most agree that we will see a 25bp cut, the Euro should see volatility if the ECB point to a second consecutive cut.

 

What about the coming months? While the ECB may cut before the BoE, we could see the BoE being more accommodative than Europe this year. Therefore, the key question for GBPEUR is how many cuts this year?

 

Calendar

Wednesday 9am | ECB President Lagarde speech

Thursday 9am | PMI (May Preliminary)






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