• Audere Research

Weekly FX Outlook May 24th


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GB Pound

Sterling traded sideways.


Movements

GBPUSD opened at 1.4109 and once again reached a new 3-month high (1.4234) before giving back part of the gain to end with a weekly performance of +0.35% at 1.4159.


GBPEUR opened at 1.1619 and traded in a tight range all week (1.1570-1.1645) to close unchanged at 1.1613.


Movement rationale

Strong UK employment data (with unemployment rate unexpectedly falling to 4.8% in the first quarter of the year) boosted the Pound at the beginning of the week, climbing to highs not seen since February versus the Dollar. The UK currency then lost all gains on Wednesday, as the CPI data release created concerns over rising inflation risk (British consumer prices rose by 1.5% in April, following a 0.7% rise in March). On Friday, the Sterling resumed its strengthening, encouraged by positive consumer confidence data (bounced back more than expected in May) and strong UK Retail Sales (double the market’s expectation, growing 9.2% in April compared with the previous month).


Week ahead

The weeks ahead has a light UK economic calendar with no significant data release.


Calendar


US Dollar


The US Dollar remains soft.


Movements

EURUSD began the week at 1.2142 and hit a 4-month high at 1.2245, before erasing most of the gains toward the end of the week to close at 1.2191 (+0.41%).


GBPUSD opened at 1.4109 and once again reached a new 3-month high (1.4234) before giving back part of the gain to end with a weekly performance of 0.35% at 1.4159.


Movement rationale

The Dollar again displayed some selling pressure this past week, as speculation that the US Federal Reserve will have to tighten its ultra-loose monetary policy sooner than anticipated, pushing global equities into the red and leading to a Dollar decline, as risk-off sentiment dictated market movements. Towards the end of the week some positive readings helped the Greenback recover some ground. While housing-related data was weaker than expected in April, the Philadelphia Fed Manufacturing Survey, US Markit PMIs and Initial Jobless Claims all came out better than expected, providing some relief to USD.


Week ahead

The US economic calendar including the following:


Calendar

Tuesday 3pm | Consumer Confidence (May), Housing Price Index (Mar)

Thursday 2:30pm | Initial Jobless Claims (May 21), Durable Goods Orders (Apr), Gross Domestic Product Annualized (Q1)

Friday 3pm | Michigan Consumer Sentiment Index (May)


Euro


The Euro hit new highs versus the Dollar.


Movements

EURUSD began the week at 1.2142 and hit a 4-month high at 1.2245, before erasing most of the gains toward the end of the week to close at 1.2191 (+0.41%).


GBPEUR opened at 1.1619 and traded in a tight range all week (1.1570-1.1645) to close unchanged at 1.1613.


Movement rationale

The single currency remains relatively well supported, hitting new highs against the Dollar and showing signs of consolidation versus Sterling. The momentum is driven by the improved Eurozone outlook and equity related inflows, as speculative investors continue to put money in EUR risk assets. Eurozone manufacturing PMI beat estimates, maintaining the pace of expansion, while some leading indicators suggest a strong second quarter.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Tuesday 7am | IFO – German Business Climate (May), Germany Gross Domestic Product (Q1)

Friday 10am | Consumer Confidence (May), Business Climate (May)




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