Market Update 23rd May – 27th May

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

GBP

GBP was stronger this week against the Dollar and Euro as it tries to grind higher through the inflationary pressures in the UK. Unemployment figures were strong for the UK, while the European economy saw its growth forecasts downgraded. The Pound Sterling was boosted by jobs this week as unemployment reached the lowest level in the UK since 1974 at 3.7 per cent. We had a speech from Andrew Bailey last week where The Bank of England’s (BoE) governor warned of “apocalyptic” food prices last week, while he added that he feels “helpless” amid soaring inflation. Inflation data last week saw the highest levels in 4 years at 9%, with more pressure on Rishi Sunak to help struggling families.We had a speech coming out from Governor Bailey today where he will most likely be addressing the cost of living crisis. If positive comments are made then this could strengthen the Pound yet if the comments come out as negative then this could potentially see the Pound weaken.

EUR

We have seen continued Euro weakness as conflict continues in Ukraine where more lives are being lost and there are concerns regarding the shortages of food. The Ukraine conflict had disrupted logistics and supply chain operations, while rising prices for a broad range of war materials are weighing on global trade and Chinese production.There was a speech from President Lagarde which spelled rumours of hiking interest rates in July, where previous monetary policy had been stabled. If rates are hiked as mentioned then we could see the Euro strengthen. Lagarde holds press conferences in detailing how the ECB observes the current and future state of the European economy. Her comments may positively or negatively the euro’s trend in the short-term.

USD

The Pound recovered against the US Dollar on Thursday from news the previous day that inflation rose to a 40 year high in April – advancing back towards the two-week high it touched on Tuesday. The dollar was dealt a further blow on Thursday when Labour Department data showed new claims for US unemployment benefits unexpectedly increased. New jobless claims jumped 21,000 to a seasonally adjusted 218,000 during the week ended 13 May – the highest level since January. Economists had forecast 200,000 applications during the period. We have a speech from Fed Chair Powell on Tuesday and jobless claims coming out on Thursday which are expected to move the exchange rate. The Initial Jobless Claims released by the US Department of Labor is a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. Generally speaking, a decreasing number should be taken as positive for the USD. However if there is an increasing number of jobless claims then we could see the USD weaken.