Monthly Currency Report – May 2024

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:   High:

GBP/EUR: Low:   High:

EUR/USD: Low:   High:

[get_blog_buttons]

NewbridgeFX:
Products

NewbridgeFX offers a specialist service in the deliverable foreign exchange market, promoting a range of products and services, available online or over the phone. Our products have been designed to meet the needs of our clients. A lot of these products are ways for businesses, and individuals, to manage and mitigate currency risk, and are used frequently during times of increased volatility. Alongside up to date foreign exchange related market news, which works in tandem with our range of products. 

Spot Contract

Lock in an exchange rate for immediate onward settlement. Funds can be received the same day.

Forward Contract

Lock in an exchange rate today, but for settlement at a later date that suits you, up to 12 months in the future.

Market Order

We monitor the markets real time and take action to trade between currencies when your desired rate is achieved.

Rate Alerts

Set an alert for phone or email notification when an exchange rate has be achieved to take advantage at the best time.

[newbridgefx_datalayer_article_push]
NewbridgeFX