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Weekly FX Outlook May 17th



GB Pound

Sterling traded sideways.


Movements

GBPUSD opened at 1.4066 and hit a 3-month high (1.4158) before giving back most of the gain to end with a weekly gain of 0.31% at 1.4109.


GBPEUR started the week at 1.1582 and showed little volatility, it briefly traded up to 1.1680 before retracing and closing at 1.1619 (+0.32%).


Movement rationale

Sterling began the week with the same tone of the previous one, maintaining the positive momentum and moving up against the Dollar (reaching its highest level since February) and Euro (5-week high) during the first part of the week. The movement was mainly prompted by the Scottish election and Conservative party’s local victories. The currency then came under slight pressure towards the end on the week, when BoE Governor Andrew Bailey suggested that interest rates would remain low for the foreseeable future, leading to GBP price reversal. On the data front, both growth and Industrial Production figures from March beat expectations (respectively +2.1% and +1.8%), reflecting economic progress materialising at the end of Q1.


Week ahead

The UK economic calendar includes the following:


Calendar

Tuesday 7am | ILO Unemployment Rate (Mar)

Wednesday 7am | Consumer Price Index (Apr)

Friday 9:30am | Markit Services PMI (May), Retail Sales (Apr)


US Dollar


The US Dollar was mixed.


Movements

EURUSD began the week at 1.2144 and remained well supported above 1.2050, ending the week unchanged at 1.2142.


GBPUSD opened at 1.4066 and hit a 3-month high (1.4158) before giving back most of the gain to end with a weekly gain of 0.31% at 1.4109.


Movement rationale

After a relatively quiet start of the week, the Dollar made some strong gains on Wednesday after the biggest jump in US inflation data in nearly 12 years (Headline CPI increased 4.2% year-over-year) surprising the market and increasing inflation concerns amid investors. Volatility for multiple currency pairs soared to a one-month high following the data surprise. The currency then lost some momentum as Fed speakers were quick to play down the data release, commenting that inflation is likely to be transitory and stimulus would still be needed for some time. The greenback finally fell across the board on Friday, erasing all previous gains, as US retail sales unexpectedly stalled in April raising concerns about the country's economic recovery.


Week ahead

In the US focus will be on the Federal Reserve’s minutes from its April meeting, with the economic calendar including the following:


Calendar

Wednesday 7pm | FOMC Minutes

Thursday 2:30pm | Initial Jobless Claims (May 14), Philadelphia Fed Manufacturing Survey (May)

Friday 2:45pm | Markit PMI Composite (May)


Euro


The Euro had a calm week.


Movements

EURUSD began the week at 1.2144 and remained well supported above 1.2050, ending the week unchanged at 1.2142.


GBPEUR started the week at 1.1582 and showed little volatility, briefly trading up to 1.1680 before retracing and closing at 1.1619 (+0.32%).


Movement rationale

Whilst the single currency remained under pressure versus Sterling during the first half of the week, it managed to print some gains against the Dollar, temporarily spiking to 1.2182 on Tuesday (its highest level in two months), following a better-than-expected ZEW Economic Sentiment Index. Also, some support was provided by Europe's accelerating vaccination campaign, with roughly 30% of EU residents having received their first jab and COVID-19 cases now falling across the region. Some disappointing figures for Industrial Production on Wednesday (0.1% month-over-month in March compared to an expected rate of 0.7%) prevented further appreciation of the currency, which ended the week relatively unchanged versus major rivals.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Tuesday 10am | Gross Domestic Product (Q1)

Wednesday 10am | Consumer Price Index (Apr)

Friday 9am | Markit PMI Composite (May)




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