Market Update 10th May – 16th May

Where you will be able to keep up to date with all the latest changes in the currency market

GBP

The Scottish election result could be key for the pound this week as votes began counting last Friday morning at 9am. Nicola sturgeon has tried to play down talks of independence lately by saying they shouldn’t ‘’steamroll’’ a path to another vote however time will tell this week how it plays out. The SNP are expected to see a fourth term and could use any majority to talk about having independence. 

However the polls were not very supportive of another referendum regardless of what the elections  say as voters have had enough of friction and uncertainty. Another stumbling block is that Boris Johnson has ruled out another vote if Scotland were to pull off their referendum as it would raise the old ghosts for the Catalonia battle with Spain. This would cause an issue with the EU on whether they support destabilising the UK or backing Welcoming Scotland back which is believed that this would cause a lot of anger amongst Catalonians.

EUR

This Tuesday will see the first data release for EUR with the ZEW economic sentiment figures for the euro zone area and Germany. 

The sentiment has been affected by the lockdowns however there is hope that the loosening of restrictions in the likes of France and Germany could see a positive effect for business expectations and confidence

As well as this on Wednesday we will see the inflation data released from the German economy. The German number could be the most significant of the week with the figure expected to hit 2% from 1.7% last month. The major banks are trying to reassure investors that the outlook is transitory.

USD

Over the last week we have seen the USD fall back from some of the large gains we had seen following a disappointing non-farm payrolls data set. The gains were only a quarter of what was expected but some analysts believe this could have been skewed by Covid-19 and may not be fully indicative of the true position of the economy. We have also seen the USD fall to the lowest level against the pound for three months, however a lot of this has been due to the large strengthening we have seen from GBP since Friday.

Bond buying (quantitative easing) is due to continue throughout the coming months and there is further room for the US Dollar to fall further in the coming weeks. Towards the end of this week we will see Inflation figures as well as retail sales which could both in turn affect the US Dollar significantly. We will also be watching out for any news on whether the US will begin to open their borders following significant vaccine progress. An air-bridge with the U.K has been discussed in past weeks but currently this travel route is at Amber status. 

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