Pound Sterling

Weekly Update: Euro Retreats as Eurozone Slips into Double-Dip Recession

The Euro fell from its best levels this week after the Eurozone’s latest GDP figures confirmed the bloc plunged into a double-dip recession over the winter.

At the same time, the US Dollar suffered a sharp selloff after the Federal Reserve struck a notably dovish tone following its latest policy meeting.

Pound Rally Tempered by UK Political Uncertainty

GBP/EUR – Up one cent on the week’s opening levels

GBP/USD – Up one cent on the week’s opening levels

The Pound traded higher this week but found its gains capped by some political uncertainty in the UK.

This followed the news that a formal investigation has been launched into how Boris Johnson funded the renovations of his Downing Street flat, with the possible scandal potentially hurting the Conservatives in next week’s local and Scottish elections.

In the spotlight for GBP investors next week will be the Bank of England’s latest rate decision. No policy changes are expected but the Pound could strengthen if the BoE strikes a hawkish tone in its outlook for rest of the year.

Euro Dented as Eurozone Suffers Double-Dip Recession

EUR/GBP – Down one pence on the week’s opening levels

EUR/USD – Unchanged on the week’s opening levels

The Euro got off to a poor start this week after Germany’s latest business confidence index printed below expectations.

The single currency then rebounded midweek on the back of a broad USD selloff, before stumbling again at the end of the week as the Eurozone’s latest GDP figures confirmed the bloc slipped into a double-dip recession.

Looking ahead, the Euro could face headwinds through next week’s session, with forecasts suggesting the Eurozone’s latest retail sales figures will report a sharp slowing of growth.

US Dollar Undermined by Dovish Fed

USD/GBP – Down one pence on the week’s opening levels

USD/EUR – Unchanged on the week’s opening levels

The US Dollar experienced aggressive selling this week after the Federal Reserve struck a dovish tone in its latest forward guidance, signalling to investors that its next rate hike is still some way off.

However, the ‘Greenback’ clawed back a good portion of its losses in the latter half of the week in response to weakening risk appetite and a stronger-than-expected US GDP print.

Turning to next week, the publication of the latest US payroll figures will be closely watched by USD investors, with the US Dollar likely to soar if the US economy witnessed another bumper increase in new jobs in April.

Australian Dollar Slips from Highs as Inflation Disappoints

AUD/GBP – Unchanged on the week’s opening levels

AUD/USD – Unchanged on the week’s opening levels

The Australian Dollar enjoyed a strong start this week, with the currency receiving a bump amidst rising commodity prices and improving market sentiment.

However, the ‘Aussie’ relinquished a significant amount of these gains as sentiment soured and Australia’s latest inflation figures printed below expectations.

AUD investors will be focused on the Reserve Bank of Australia next week as it concludes its latest policy meeting, with the Australian Dollar poised to strengthen if the RBA strikes an upbeat tone in its forward guidance.

Key Data

May 3 USD Manufacturing PMI (Apr)

May 4 AUD Trade Balance (Mar)

May 4 AUD RBA Rate Decision

May 5 EUR Eurozone Services PMI (Apr)

May 5 USD Non-Manufacturing PMI (Apr)

May 6 EUR German Factory Orders (Mar)

May 6 GBP Services PMI

May 6 EUR Retail Sales (Mar)

May 6 GBP BoE Rate Decision

May 6 GBP Scottish Parliamentary Election

May 7 USD Non-Farm Payrolls (Apr)