Market Update 9th May – 13th May

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

GBP

The British Pound is losing value to the Dollar and Euro at the start of the new week with investors continuing to sell in the wake of the Bank of England’s cautious rate hike and amidst an ongoing backdrop of deteriorating global investor sentiment. The Bank of England raise the interest rate from 0.75% to 1% which is the highest we have seen for 13 years. This means we could see the cost of living become much more expensive in the coming years. The UK is set for higher energy bills in October which will tip the country into negative growth for the fourth quarter, according to the BoE. Their forecast for 0.25% growth next year is as good a warning of recession as you can get from optimistic policymakers. On Thursday we have the Gross Domestic Product released by the National Statistics, this is a measure of the total value of goods and services produced in the UK. If the figures are higher than expected then we could see the pound strengthen yet if the figures come out lower than expected, we could see the pound weaken even further.

EUR

As we enter nearly the 3rd month of conflict within Ukraine we have seen the EUR weaken against the USD and GBP and with Putin celebrating victory day there could be talks on when the war in Ukraine may end. German exports to Russia have slumped to their lowest in almost two decades, as the Ukraine war hits the European economy. Exports to Russia were hit hard, dropping over 60% compared to February, due to sanctions imposed as a result of the Ukraine invasion. We have President Lagarde speaking this Wednesday, this will be a good indication into the future state of the European economy. Herr comments can really impact the Euro in the short term, if her comments are negative then we could expect to see the euro weaken however if her comments come out positive then we could see possible euro strength.

USD

We have seen the dollar drop to the lowest rate we have seen before the pandemic; this is because last week we had the Federal Reserve raised their interest rates by 0.5% the hike is the largest since 2000 and has been put in place to tackle inflation. With the continued conflict going on in Ukraine we have seen continued dollar strength with rates at pre pandemic levels. Putin is speaking in The Red Square today following the celebrations of Victory Day. There could be mentions of the Ukraine war meaning that we could see large volatility with the greenback.