Monthly Currency Report – May 2024

Friday 31st May – The pound (GBP) weakened against several major currencies as the absence of new UK economic data left it vulnerable. However, a lack of new data also meant that it was open to losses.

 

In contrast, the Euro (EUR) gained strength on Friday following a higher-than-expected Eurozone consumer price index. Inflation in the bloc climbed from 2.4% in April to 2.6% in May, supporting EUR. Yet, end-of-month volatility capped its gains.

The US dollar (USD) saw a sharp decline after the latest US core PCE price index suggested easing inflation. Monthly core inflation increased by 0.2%, falling short of the anticipated 0.3%. Despite this drop, the steadiness of annual inflation helped USD recover from the initial investor reaction.

Thursday 30th May

There was a decline in the Pound due to a persistent lack of UK economic data, leaving it open to losses. With no data or events to bolster GBP, it fell against stronger currencies.

The euro (EUR) showed no clear trend despite positive Eurozone data. Unemployment dropped to a record low of 6.4% in April, and economic sentiment improved in May. However, the single currency did not achieve significant gains.

The US dollar (USD) decreased after the GDP growth rate for the first quarter was revised downward. The US economy grew by 1.3% in the first three months of 2024, below the initial estimate of 1.6% and a sharp drop from 3.4% in the previous quarter.

Wednesday 29th May

With no new UK data, the pound (GBP) remained vulnerable to global risk dynamics, leading to losses against stronger currencies. However, a shift in Bank of England (BoE) interest rate cut expectations provided some support, making a rate cut in June highly unlikely.

The euro’s (EUR) strong negative correlation with the US dollar (USD) limited its gains, as investors preferred USD. Still, higher German inflation in May and improved German consumer confidence helped the euro strengthen against weaker currencies.

The US dollar surged, driven by a sharp rise in US Treasury yields. This movement followed upbeat US consumer confidence data and hawkish comments from a Federal Reserve official, prompting markets to adjust their interest rate expectations.

Tuesday 28th May

The pound (GBP) experienced fluctuations, though a stronger-than-expected distributive trades survey from the Confederation of British Industry (CBI) provided some support. The survey revealed a surprising rise in retail trade this month, suggesting a rebound in sales after April’s downturn. However, indications of easing inflationary pressures may have limited the pound’s gains.

There was some volatile trading for the Euro (EUR) as bets on a European Central Bank (ECB) interest rate cut added uncertainty. ECB policymaker Klaas Knot joined others in signalling a likely rate cut next week. Nonetheless, higher-than-expected German producer prices may have led some investors to reconsider the pace of the ECB’s policy easing after the June meeting.

The US dollar (USD) started the session weak, hitting a fresh two-month low against the pound amid a cautiously optimistic market. Hawkish comments from Federal Reserve policymaker Neel Kashkari helped USD recover slightly, as he mentioned that another rate hike is still a possibility. However, his remarks had a limited effect since Kashkari is not voting on Fed policy this year.

Monday 27th May

The pound (GBP) remained steady on Friday, avoiding a significant selloff despite a sharp 2.3% drop in UK retail sales in April. While the disappointing retail data did apply pressure, Sterling was able to hold its ground due to a positive market sentiment and reduced expectations of a Bank of England (BoE) interest rate cut.

The euro (EUR) was also subdued, weighed down by expectations of a European Central Bank (ECB) rate cut next week. However, the downside was limited by the euro’s strong negative correlation with the declining US dollar (USD).

A positive market mood weakened the safe-haven US dollar on Friday, and an unexpected rise in US durable goods orders did not boost the currency. USD continued to decline at the start of the week as investors favoured riskier currencies.

Friday 24th May

On Friday, the pound (GBP) remained relatively stable despite a significant 2.3% decline in UK retail sales during April. Although the disappointing retail figures added some pressure to the pound, it managed to avoid a sharp decline, partly due to a positive market sentiment and decreased expectations for a Bank of England (BoE) interest rate cut.Meanwhile, the euro (EUR) experienced limited movement on Friday amid continued speculations of an impending rate cut by the European Central Bank (ECB) next week. Nonetheless, the euro’s downward trend was tempered by its strong inverse relationship with the weakening US dollar (USD).

The market’s appetite for risk dampened the safe-haven appeal of the US dollar on Friday, despite an unexpected uptick in US durable goods orders failing to bolster the currency. USD sustained its losses into the new week as investors favored riskier currencies over the greenback.

Thursday 23rd May

The pound (GBP) faced challenges as the latest UK services PMI indicated a more significant slowdown in business activity than anticipated. However, Sterling found support from an unexpected growth in the British manufacturing index, which helped mitigate its decline.

The euro (EUR) exhibited mixed performance on Thursday, strengthening against some weaker currencies but struggling against others due to conflicting PMI data. While the Eurozone’s services index slightly missed expectations, it still indicated robust activity in the sector. Conversely, despite surpassing forecasts, the manufacturing PMI signaled a continued contraction in factory activity.

Initially, the US dollar (USD) softened on Thursday morning, undergoing a correction following a rally on Wednesday evening. However, USD rebounded later in the day, buoyed by a decrease in initial jobless claims and a significantly stronger-than-expected US services PMI.

Wednesday 22nd May

On Wednesday, the pound (GBP) surged to its highest levels in two months following the release of the UK’s consumer price index for April, which surpassed expectations. This dampened speculation about a potential interest rate cut from the Bank of England (BoE) in June. Although profit-taking caused some fluctuations in Sterling’s value, it managed to retain most of its gains by the end of the trading session.

Meanwhile, the euro (EUR) faced challenges on Wednesday, weakening against stronger currencies due to a lack of economic data from the Eurozone. Despite a risk-off sentiment providing some support to the safer euro, its negative correlation with the strengthening US dollar (USD) limited its upward momentum.

The US dollar strengthened on Wednesday, supported by a risk-off market sentiment and an initial increase in US Treasury yields. Later in the day, the release of the Federal Reserve’s meeting minutes provided additional support to the ‘greenback’ as they indicated that Fed policymakers were willing to consider raising rates again if inflation persists.

Tuesday 21st May

The pound (GBP) experienced wide fluctuations as conflicting factors of economic optimism and speculation about potential Bank of England (BoE) interest rate cuts influenced its trajectory. Despite the International Monetary Fund (IMF) raising its growth forecast for the UK in 2024, it also suggested that the BoE might consider reducing rates two or three times within the year.

Meanwhile, the euro (EUR) encountered resistance on Tuesday following Germany’s disappointing producer price inflation data. April’s figures showed a steeper-than-expected decline of 3.3% annually, surpassing forecasts of a 3.2% decrease. Given the potential impact of producer prices on overall inflation, this data reinforced expectations of multiple interest rate cuts by the European Central Bank (ECB) in the coming months.

The US dollar (USD) lacked clear direction on Tuesday, with limited market-moving data from the US and caution preceding the release of the Federal Reserve’s meeting minutes later in the day. Despite a decline in US Treasury bond yields adding some pressure on the ‘greenback,’ moderately hawkish comments from certain Fed policymakers counteracted the downside.

Monday 20th May

The pound (GBP) gained strength against its weaker counterparts despite mixed remarks from Bank of England (BoE) Deputy Governor Ben Broadbent. While Broadbent acknowledged the possibility of an interest rate cut in the summer, he also indicated policymakers’ caution about implementing rate cuts prematurely.

Conversely, the euro (EUR) weakened on Monday amid a dearth of Eurozone data, leaving the single currency struggling to find traction. Additionally, comments from European Central Bank (ECB) policymaker Martins Kazaks advocating for a rate cut in June exerted downward pressure on the EUR. However, Kazaks also cautioned against overly hastening policy loosening in the subsequent months.

Meanwhile, the US dollar (USD) edged higher on Monday following remarks from various Federal Reserve officials. Despite differences in tone among policymakers, their collective stance suggested a reluctance to rush into interest rate cuts, which bolstered support for the USD.

Friday 17th May

The pound (GBP) saw a surge against several of its counterparts on Friday, buoyed by an uptick in market optimism that favoured the increasingly risk-sensitive currency. As risk appetite grew, GBP managed to advance against its safer peers, although it faced some setbacks in other pairings.Conversely, the euro (EUR) experienced a decline on Friday, prompted by dovish remarks from European Central Bank (ECB) officials. Comments from ECB Vice-President Luis de Guindos suggesting ongoing easing of price pressures and remarks from influential hawk Isabel Schnabel hinting at a possible June rate cut contributed to the euro’s softening, although Schnabel attempted to temper expectations for consecutive rate cuts.

Despite an initial uptick on Friday, the US dollar (USD) faltered later in the day as a preference for riskier currencies emerged, diminishing demand for the safe-haven ‘greenback’. Despite an increase in US Treasury yields, the USD faced downward pressure.

Thursday 16th May

The pound (GBP) experienced a slight downturn against select counterparts yesterday following remarks from Bank of England (BoE) policymaker Megan Greene, who indicated a diminishing persistence of inflation in the UK. However, Greene’s cautious stance, insisting on sustainable evidence of inflation control before advocating for an interest rate cut, mitigated GBP’s decline.

In contrast, the euro (EUR) displayed mixed performance on Thursday amid a dearth of Eurozone data, leaving the currency without a clear trajectory. While a prevailing risk-off sentiment bolstered the safe-haven appeal of the euro, its robust negative correlation with the strengthening US dollar (USD) placed some downward pressure on the single currency.

Meanwhile, the US dollar demonstrated resilience on Thursday, recuperating some of its losses from the previous day, buoyed by a sombre market sentiment and an uptick in US Treasury yields, which heightened demand for the ‘greenback’. Additionally, support for the USD stemmed from the latest initial jobless claims figure, which although slightly surpassing forecasts, was perceived positively by USD investors, particularly in comparison to the preceding week’s data.

Wednesday 15th May

The pound (GBP) saw an uptick against its safer counterparts on Tuesday as a wave of bullish market sentiment lifted the increasingly risk-sensitive UK currency. Contributing to the positive market mood was the release of the latest US inflation data, which indicated a slowdown in April, further fueling expectations of imminent Federal Reserve interest rate cuts.

Conversely, the euro (EUR) advanced against a number of its rivals on Tuesday following a series of encouraging Eurozone economic indicators. March’s industrial production in the bloc surpassed expectations, expanding by 0.6% instead of the projected 0.5%. Moreover, the second estimate for Eurozone GDP growth confirmed a 0.3% expansion in the first quarter, bolstering confidence in the euro.

Meanwhile, the US dollar (USD) experienced a decline to a one-month low on Tuesday, spurred by subdued US inflation figures for April, which heightened speculations of potential Federal Reserve rate cuts. The USD’s downtrend was further accentuated by weaker-than-expected US retail sales data, revealing an unexpected stagnation in domestic sales during April.

Tuesday 14th May

The pound (GBP) exhibited downward fluctuations yesterday in response to mixed jobs data. Despite surpassing forecasts, wage growth was overshadowed by a surge in UK unemployment to an eight-month high. Furthermore, Bank of England (BoE) Chief Economist Huw Pill’s remarks, suggesting a potential interest rate cut over the summer, added to the downward pressure on the pound.

Conversely, the euro (EUR) saw a modest uptick during Tuesday’s session, buoyed by the release of Germany’s latest ZEW economic sentiment index. Economic confidence in the Eurozone’s largest economy continued to improve in the current month, outpacing expectations and fostering optimism for a robust German economic revival.

Meanwhile, the US dollar (USD) experienced a decline on Tuesday following a downward revision to March’s producer price inflation figures, fueling expectations for a softer consumer price index later in the day. However, some moderately hawkish remarks from Federal Reserve Chair Jerome Powell helped mitigate USD losses, as Powell suggested that it might “take longer than expected” to rein in inflationary pressures.

Monday 13th May

On Monday, the pound (GBP) initially encountered stumbling blocks before staging a recovery in the afternoon, ultimately edging higher against its weaker counterparts. The day’s oscillations reflected a blend of cautious optimism surrounding the UK economy and mounting speculations of an interest rate cut from the Bank of England (BoE) in June.

Similarly, the euro (EUR) experienced mixed movements on Monday, characterised by a lack of significant Eurozone economic data. While the euro benefited from its negative correlation with a weakening US dollar (USD), the absence of data prevented the currency from capitalising on this advantage.

In contrast, the US dollar faced downward pressure on Monday as an improved market sentiment diminished demand for the safe-haven currency. Additionally, a marginal decrease in US Treasury yields contributed to the weakening of the USD.

Friday 10th May

The pound (GBP) started the day on a positive note after data revealed that the British economy exited recession in the first quarter of the year, with UK GDP expanding more than anticipated. However, Sterling failed to maintain its momentum. Concerns about slow growth in the coming months and expectations of imminent interest rate cuts from the Bank of England (BoE) weighed on the pound’s appeal, leading to a reversal of its earlier gains.In contrast, the euro (EUR) faced downward pressure against many of its counterparts on Friday following the release of minutes from the European Central Bank’s (ECB) recent meeting. The minutes indicated that policymakers are planning to reduce rates at the ECB’s upcoming meeting next month, unless there are any unexpected inflation developments in the interim.

Meanwhile, the US dollar (USD) managed to make modest gains towards the end of the week, supported by an increase in US Treasury bond yields. However, the USD’s upward momentum was limited by a decline in American consumer confidence and a subdued market sentiment.

Thursday 9th May

The Pound (GBP) experienced fluctuations, edging lower against its major counterparts following the Bank of England’s (BoE) announcement of its latest interest rate decision. Although the BoE kept its policy unchanged, Governor Andrew Bailey hinted at the possibility of faster rate cuts than what the markets had anticipated, adding pressure on the pound.

The Euro (EUR) had a mixed performance on Thursday. Initially, the single currency stumbled as speculations of ECB rate cuts weighed on it. However, the euro managed to recover against its weaker rivals later in the day, benefiting from its negative correlation with the declining US dollar (USD).

Meanwhile, the US dollar weakened on Thursday after new US jobless claims surged more than expected, reaching the highest level in eight months. This raised concerns about a slowdown in the US labour market, leading to increased expectations of multiple rate cuts from the Federal Reserve in 2024 and putting pressure on the greenback.

Wednesday 8th May

The Pound (GBP) faced losses against several major currencies, hitting a two-week low against the euro (EUR), as market sentiment turned pessimistic, weighing on the increasingly risk-sensitive currency. Additionally, investors remained hesitant to support the pound ahead of the Bank of England’s (BoE) forthcoming interest rate decision.

On the other hand, the euro found support during Wednesday’s session, despite a contraction in German industrial production. Although output in the Eurozone’s largest economy declined by 0.4% in March, it was better than the anticipated 0.6% drop. Furthermore, the euro benefited from a risk-averse market sentiment, strengthening as a safe-haven currency.

Meanwhile, the US dollar (USD) edged higher on Wednesday, buoyed by a risk-off market sentiment that prompted safe-haven flows into the ‘greenback’. Additionally, an increase in US Treasury yields provided modest support for the American currency.

Tuesday 7th May

The pound (GBP) lacked a clear direction on Tuesday, facing volatility due to a lack of UK data. Moreover, uncertainty prevailed as investors awaited the Bank of England’s (BoE) interest rate decision scheduled for tomorrow.

On the other hand, the euro (EUR) strengthened yesterday, disregarding a decline in German factory orders, and gained ground against its weaker counterparts. EUR was supported by an increase in German exports and a larger-than-expected recovery in Eurozone retail sales.

Meanwhile, the US dollar (USD) experienced mixed movement on Tuesday, remaining within a narrow range due to an uncertain market sentiment and a lack of significant data. Confusing statements from some Federal Reserve policymakers added to the uncertainty surrounding the ‘greenback’.

Friday 3rd May

The pound (GBP) faced challenges against its stronger counterparts on Friday, despite the UK’s final services PMI confirming robust expansion in April. Pressure on Sterling may have stemmed from Bank of England (BoE) rate cut speculations. Although markets anticipate a rate cut in August, there were speculations on Friday that the bank might initiate policy loosening as early as June.In addition, the euro (EUR) strengthened on Friday, benefiting from its strong negative correlation with a declining US dollar (USD). Additionally, new data revealed that the Eurozone’s unemployment rate remained at a record low in March, further supporting the EUR.

The US dollar slipped to multi-week lows on Friday following the release of the latest non-farm payrolls report, which indicated a sharper-than-expected slowdown in US job creation last month. Although USD exchange rates recovered as investors bought the dip, the ‘greenback’ still ended the day’s session lower overall, despite a weaker ISM services PMI.

Thursday 2nd May

Yesterday, the pound (GBP) declined following the OECD’s decision to slash its growth projections for the UK. The Paris-based think tank now anticipates the UK to have the weakest performance among G7 economies next year. Additionally, it revised down its growth forecasts for this year from 0.7% to 0.4%.

On Thursday, the euro (EUR) weakened as the Eurozone’s final manufacturing PMI confirmed a deepening contraction in factory activity across the Eurozone. However, the euro found some support in the afternoon due to its strong negative correlation with the US dollar (USD), which softened during the session.

The US dollar initially gained ground yesterday, supported by a risk-off sentiment and positive jobs data. However, it later retreated as risk appetite returned, diminishing the appeal of the safe-haven currency.

Wednesday 1st May

The pound (GBP) traded with little momentum yesterday following the release of the final UK manufacturing PMI for April, which confirmed a contraction in factory activity. However, the survey results were revised slightly higher than preliminary estimates, mitigating some of GBP’s losses.

Despite Eurozone markets being closed for the May Day holiday, the euro (EUR) found some support on Wednesday. A deteriorating market sentiment favored the safer single currency, while the euro’s negative correlation with a weaker US dollar (USD) also contributed to its resilience.

The US dollar encountered difficulties on Wednesday following a surprise contraction in the American manufacturing sector and a more pronounced slowdown in job openings. USD exchange rates then declined further after the Federal Reserve’s decision in the evening. Fed Chair Jerome Powell’s unexpectedly dovish tone weighed on the ‘greenback’.

Tuesday 30th April

The pound (GBP) struggled to find direction on Tuesday as the absence of UK economic data left it susceptible to shifts in market sentiment. In this environment, the currency, increasingly sensitive to risk, weakened against safer counterparts but managed to gain against riskier currencies.

The euro (EUR) strengthened during the session following positive Eurozone GDP data, which surpassed expectations, signaling a promising return to growth in the first quarter of 2024. Additionally, the Eurozone consumer price index exceeded forecasts, with headline inflation holding steady at 2.4% and core inflation easing from 2.9% to 2.7%—above the predicted 2.6%. These figures prompted speculation of a less aggressive pace of policy loosening from the European Central Bank (ECB).

Meanwhile, the US dollar (USD) advanced as diminishing risk appetite bolstered demand for the safe-haven currency. Recent optimism surrounding peace talks in the Middle East waned after Israeli Prime Minister Benjamin Netanyahu announced plans to continue with his controversial assault on Rafah, stating that he would proceed “with or without a [ceasefire] deal.”

Monday 29th April

The pound (GBP) advanced against several counterparts on Monday, despite the absence of significant British economic data. The currency, increasingly influenced by market sentiment, benefited from a positive mood in the market, buoyed by hopes for progress on a ceasefire deal in the Middle East.

Conversely, the euro (EUR) faced challenges on Monday as economic sentiment in the Eurozone unexpectedly declined in April. Additionally, mixed German inflation data added to the currency’s volatility. Although the harmonized inflation rate surpassed forecasts, headline inflation fell short of expectations.

Meanwhile, the US dollar (USD) started the week on shaky ground as the prevailing risk-on sentiment reduced demand for the safe-haven currency. Optimism surrounding ceasefire negotiations in the Middle East, coupled with last week’s impressive profit announcements from numerous tech and commodities firms, boosted investor confidence.

Currency Ranges for the month:

GBP/USD: Low: 1.24717   High: 1.27985

GBP/EUR: Low: 1.16057   High: 1.17782

EUR/USD: Low: 1.07177  High: 1.08942

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