Market Insight

Weekly Round-Up & The Week Ahead

Reece Dye

Reece Dye

Head of Corporate Clients

Published Last Updated 3 min read

Weekly round-up and a look at the week ahead for EUR, GBP, and USD.

USD

Markets were forced to readjust their expectations on the timing of the first Fed rate cut last week, following hotter than anticipated CPI figures. The data, which showed prices increasing 0.4% month-on-month, was enough to push back predictions to September, with the probability of a June rate cut reduced from around 50% before the data, to less than 20% after. Geopolitical tensions have also played a part, but in general the dollar looks strong, with a clear reversal seen in the forecasts from late last year on policy divergence. The short to medium term outlook for the dollar is now one of strength, with both the euro and pound suffering heavily in the second half of last week.

A lighter calendar for US data this week may give markets time to settle and digest the action from last week. Retail Sales today may well have less effect than speeches from various Fed members over the next five days.

EUR

The European Central Bank acted as expected last week, holding key metrics while hinting at a cutting cycle that should kick-off in June. Comments from President Lagarde were enough for most analysts to stick with prior thinking on the timing for a cut, with around a 75% chance predicted. It would likely take a serious change in data to derail the ECB from a cut in two month’s time. EUR/USD dropped heavily in the aftermath of US inflation data, touching lows last seen in November, and may well test the 1.05 handle in the coming weeks.

Finalised HICP figures for the eurozone released on Wednesday could play second fiddle to ECB speech rhetoric. Safe-haven flows should also be closely watched with tensions building in Israel and Iran.

GBP

The pound was largely ignored last week as US inflation data and the ECB meeting took centre stage. That storyline will change this week with earnings and employment data on Tuesday as well as CPI readings on Wednesday in the UK. Inflation will be key, with markets already pushing back slightly against a June rate cut from the BoE. GBP/USD fell back below 1.25 last week for the first time since late November and could remain under pressure if a clear picture of policy divergence emerges.

Retail Sales will round off a busy week for UK data on Friday, although any major movements will likely be centred around Wednesday’s inflation figures.


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