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Sterling made gains over its rivals to begin the week.
The pound recovered to its best level against the euro in around two weeks yesterday and made smaller gains against the US dollar.
GBP/EUR returned to the range it had been trading in after Easter as the storm clouds of interest rate speculation and comments from central bankers began to dissipate. EUR/USD meanwhile treaded water, but the euro has lost around two cents to the US dollar over the course of the last three weeks.
It may be a case of hiding in plain sight for sterling, with this week’s hard hitting macro figures strongly tilted towards the eurozone and the US. Nonetheless, interest in the Bank of England’s trajectory persists as markets try to gauge when the first cut will be made.
Nobody is seriously expecting the Federal Reserve to cut anytime soon. Jerome Powell will face the media on Wednesday evening, with many commentators predicting he will don his finest hawk robes and argue that elevated rates are necessary to pierce inflation’s bubble.
German inflation held steady at 2.2% in April’s preliminary read. CPI had been forecast to rise to 2.3%, but a downturn in services price increases helped it remain at its joint lowest since May 2021.
Economic sentiment in the eurozone declined to 95.6 in April from last month’s 96.2. That was lower than the expected 97, driven by a sharp decline in confidence among manufacturers.
Hopes for a diplomatic breakthrough in the Middle East are growing after Israel appeared to change its demands for a hostage deal. According to one diplomat, the potential deal includes a six-week ceasefire followed by a second phase of “sustainable calm”. Should it come to pass, a solution would be a massive tonic for currency markets, as well as the onlooking world.
Humza Yusuf yesterday resigned as leader of the Scottish National Party (SNP). His decision came just over a year after he took over the position and will force the SNP to hold a leadership contest before the UK general election.
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GBP: Range rover
The pound made a welcome return to its range against the euro and the US dollar from before the recent selloff. Whether that level stays for the longer term is anyone’s guess.
GBP/USD: the past year
EUR: Gloomy manufacturing
The eurozone’s manufacturing sector was particularly glum in April. In fact, confidence among the group fell to its lowest level since July 2020, when the threat of the pandemic hung over factories.
GBP/EUR: the past year
USD: Danger ahead
The US dollar must navigate a busy week, but perhaps it’s the dollar’s peers that should be worried. Jerome Powell may well give the US dollar a boost by adopting a more aggressive posture on rates than in previous Fed meetings.
EUR/USD: the past year
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