Weekly Report – 23rd May to 27th May 2022

Friday 27th May -The Pound slipped initially during trading although it did manage to make up for any losses during the afternoon. This came down to the analysis of the support package from Rishi Sunak as some criticised the borrowing although some said that it could also help to avoid a recession.

 

A lack of data meant that the Euro lost ground against some of its peers while reports of Russia making progress in Ukraine also placed pressure on the single currency.

The US Dollar also moved close to monthly lows as a risk-on mood meant that demand for the safe-haven currency was low. Adding to this was news that inflation was easing as the core PCE price index dropped to 4.9% from 5.2% and that weighed heavily on the Greenback.

Thursday 26th May

The announcement of the economic support package from Rishi Sunak left the Pound vulnerable. The announcement was welcomed although it came with warnings that the windfall tax would have an impact on investment and there were concerns around further government borrowing, all of which placed pressure on the currency.

It was a better day for the Euro as it made gains even though trading conditions were thin. A positive mood in European equity markets helped to boost the mood in investors while the single currency also benefited from a negative correlation with the US Dollar.

The US Dollar struggled after risk appetite recovered which weighed heavily on the Greenback. US GDP growth had contracted more than expected and this added to the downside of the safe-haven currency.

Wednesday 25th May

Following the release of the Partygate report, the Pound wobbled as it initially lost ground due to political uncertainty although it did recover once it became clear that Boris Johnson would survive. Along with this, a change in the market mood also added to the mixed movement of the Pound.

The Euro weakened following the release of the German consumer climate indicator which left investors concerned. Consumer sentiment had dropped to the lowest level seen as the invasion of Ukraine continued to weigh heavily on the single currency.

The US Dollar experienced volatility during trading as investors awaited the minutes from the Federal Open Market Committee meeting. Adding to the uncertainty was news that US durable goods came in below expectations while risk sentiment also struggled.

Tuesday 24th May

There was a significant drop in the Pound as the UK’s flash PMIs indicated that the service sector experienced a drop in growth. The services PMI did not meet forecasts and dropped instead which placed a lot of pressure on the currency.

The Euro continued to make gains as markets continued to add in price rate hikes from the European Central Bank. The bank indicated that rate rises are likely in July and September, both of which gave the single currency a boost.

It was a mixed day for the US Dollar as it moved in many directions against its rivals. This was down to a weaker market mood and a lack of data to push the Greenback in any direction.

Monday 23rd May

The Pound experienced some decent gains following the Bank of England stating that the bank is ready to increase interest rates in order to help ease rising inflation. Despite the hawkish comments, there were warnings that things are not going to get any easier for households and any rate rises would only cause further problems.

The Euro leapt higher after the European Central Bank Laid plans for rate rises in July and September. German business confidence also increased although the German Ifo business climate indicator reached a new three month high which meant that recession concerns were easing.

It was a difficult day for the US dollar as risk on mood dampened demand for the currency. Despite this, the currency is underpinned by rate hike bets and that helped to prevent any additional losses.

Currency Ranges for the week:

GBP/USD: Low: 1.24759 High: 1.2663

GBP/EUR: Low: 1.16505  High: 1.1802

EUR/USD: Low: 1.06469  High: 1.0764

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