Weekly Report – 16th May to 20th May 2022

Friday 20th May -The Pound strengthened after there was an unexpected rise in UK retail sales of 1.4%, particularly as forecasts suggested that there would be a contraction of 0.2%. There was also a rise in food store sales which indicated that consumers are staying at home and this could have put a limit on any gains.

 

Through the session, the Euro weakened after the latest consumer confidence report placed pressure on the single currency. While data came in better than expected, morale in consumers remained low and that held the Euro back.

It was a quiet start for the US Dollar after it reacted to a difficult week. Despite this, the safe-haven currency made some gains during the afternoon after it benefitted from dip-buying.

Thursday 19th May

It was a mixed day for the Pound as it made up ground against many rivals following a rise in orders for UK manufacturers. Despite this, any gains were limited after manufacturing firms lost confidence while a risk off-mood in the face of a potential recession left the currency lacking in support.

It was a limited day for the Euro and even a sell-off in European stock markets couldn’t bolster the single currency. However, some support was found in the form of April meeting accounts from the European Central Bank which took a hawkish stance.

The US Dollar lost ground, despite a risk-off mood as there were concerns that the US economy might not be as strong as initially thought. US retail giants saw a drop in earnings and a large rise in initial jobless claims meant that the currency faced significant headwinds.

Wednesday 18th May

During the session, the Pound dropped following news that inflation had increased to a new 40-year high of 9%. As the UK is looking likely to face a recession as well as the Bank of England holding back on the increase of interest rate, it meant that the currency was placed under mounting pressure.

It was a volatile day for the Euro as investors decided to take a look at the latest inflation rate reading. Inflation remained stagnant at 7.4% during April although it did come in under expectations. This meant that traders remained disappointed with this while it meant that the European Central Bank was less likely to increase rates.

The US Dollar fluctuated during trading as a weak market mood failed to give the currency any direction. Despite this, the currency did stabilise during the afternoon as it took advantage of its weaker rivals and benefited from support following comments from the Federal Reserve

Tuesday 17th May

The Pound leapt higher as it reached two-week highs against both the US Dollar and the Euro following the release of a positive labour market report. The UK unemployment rate came in better than forecasts as it dropped to a new 48-year low. Furthermore, average earnings increased by 7% while investors were hopeful that wage growth would help to ease the cost-of-living crisis.

The Euro also made up ground as Eurozone GDP growth came in better than expected. During the first quarter of 2022, it came in at 0.3% which was better than the 0.2% expected and this helped to give the single currency a boost.

The US Dollar dropped back as a positive market mood dented demand for the Greenback. However, solid data in the afternoon meant that the safe-haven currency managed to claw back some ground, while growth in US retail sales and an increase in industrial production also helped to support the currency.

Monday 16th May

At the start of trading, the Pound lost ground after disappointing Chinese economic data impacted the European markets and this placed pressure on the currency. However, some of the losses were recovered later in the day as the market mood improved although it still dropped further behind many of its rivals.

The Euro also suffered, even managing to lose some of the gains it had made during the morning as it reacted to news that a trade deficit was posted for the Eurozone during March. Furthermore, EU growth forecasts were also downgraded to 2.7% for 2022 from 4% and that weighed heavily on the single currency.

There was an element of volatility in the US Dollar as risk sentiment changed direction although Federal Reserve rate hike bets helped to support the safe-haven currency and hold back any losses.

Currency Ranges for the week:

GBP/USD: Low: 1.22421 High: 1.25176

GBP/EUR: Low: 1.17478  High: 1.19082

EUR/USD: Low: 1.04007  High: 1.06063

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