Market Update 3rd May – 9th May
Where you will be able to keep up to date with all the latest changes in the currency market
The UK economy has shifted investor focus to other events, including political developments in Westminster, where Prime Minister Boris Johnson has had numerous allegations towards him. This includes how he responded to the pandemic; who paid for the refurbishment of his Downing Street flat; together with an inquiry into leaks of private information from his office. Further, the UK economy is expected to grow at a fast pace for the rest of 2021, between 6-7%.
Whereas the Eurozone will struggle to come anywhere near this. Even at present, the GBPEUR rate is trading at a much lower rate than analysts thought it would be. The Bank of England will meet this Thursday to announce the latest interest rate decision and monetary policy. Analysts are seeing an early winding down of the assets that the BoE has been purchasing since the pandemic began. Any talks to reduce asset purchases could be the foundation for an interest rate increase. This is a massive change to a few months prior, where negative interest rates were the main point of discussion.
The euro failed to get a lift from GDP growth figures after they came in close to market expectations. Germany and Italy released their GDP Q1 results, both showing a loss for the quarter and this has aided a boost for the pound after the UK economy grew in Q1 and is now reopen. Inflation followed the Eurozone’s GDP figures, and Germany saw its first rise above 2% in two years, but nobody is mentioning any signs of stagflation just yet.
The European economy was growing before the pandemic and stimulus was simply propping things up. To destroy the underlying tourism and other sectors may not see the bounce that many have anticipated. Scotland will vote on the 6th of May in parliamentary elections on the same day as the BoE announcement and the talk of independence will likely return. Alex Salmond, lead of the Alba Party, wants to immediately push for referendum talks with the UK government, while the First Minister distanced herself from “bulldozing” a way to independence.
The US last week saw a sharp spike in bond yields which strengthened the dollar against most major currencies. Furthermore, the president of the Federal Reserve Bank of Dallas indicated that there could be an increase in interest rates this summer, which would see the dollar strengthen further. With non-farm payrolls released on Friday afternoon, a lot of volatility is to be expected on the dollar.
However, figures are expected to be positive, with a consensus that the US has recovered +975K jobs from coronavirus in April – up from +915K seen in March. Also, vaccination progress in the US is still on target, with New York dropping most restrictions and many fans returning to large events. The FDA recently gave the OK for giving the vaccine to adolescents aged 12-15, as the country leads the way with exiting lockdown and life returning to normal.