GB Pound
What happened last week?
↑ Sterling traded as a function of the dollar last week as the UK had no significant data ahead of the interest rate announcement this Thursday.
What to watch for in the short-term?
↓ With some still believing the BoE may cut rates in June, markets will be looking for a shift to dovish rhetoric in this week’s interest rate announcement. As the base case is still a cut in August, any hints from Andrew Bailey for a June cut poses a downside risk for Cable.
What about the coming months?↓ Even if Thursdays meeting rules out the possibility of a June rate cut, the underlying divergence of rates between the US and the UK will weigh on sterling over the coming months.
Calendar
Thursday 12pm | Interest Rate Decision
Friday 7am | GDP (YoY) (Q1)
US Dollar
What happened last week?
↓ In the Fed’s interest rate announcement Powell made efforts to rule out any further hikes but also pointed out that they are still a long way from being in a position to cut. Also last week, Friday saw a softer jobs report causing the dollar to move lower.
What to watch for in the short-term?
↑ With a quiet week for US data there is little to move the dollar until the next CPI report next week.
What about the coming months?
↑ The dollar continues to be the currency of choice for the medium term carry trade.
Calendar
Michigan Consumer Sentiment Index (May)
Euro
What happened last week?
↓ While last week’s inflation data was slightly hotter than expected (2.7% Vs 2.6% consensus), prices continue to trend back toward the ECB’s 2% target.
What to watch for in the short-term?
↓ Alongside softening inflation in Europe, growth data surprised to the upside on Friday (YoY GDP came in at 0.4% in Q1) which helped EURGBP appreciate last week. As there’s a lack of data in the UK and Europe in the short term, we could see volatility drop and the pair trade rangebound.
What about the coming months?↓ The key EURGBP driver over the coming months is the number of cuts the ECB and BoE perform in 2024. Currently markets price c.75bp in Europe.
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