GBP
The pound had another poor week last week, ending in the red for the second week in a row and trading beneath 1.25 to its weakest level since summer 2020.
A combination of poor economic data, expectations for a dovish BoE shift, poor risk appetite, and continued USD demand drove the move, with momentum now firmly in favour of sterling bears.
This week, all eyes will be on Thursday’s Bank of England decision, with a fourth straight rate hike set to be accompanied by a dovish shift, with policymakers likely to flag increasing concern over the growth outlook, despite elevated inflation.
Thursday’s local elections are worth watching, as a barometer for government approval, though results are unlikely to be market-moving.
USD
The dollar remains the best performing G10 currency, rallying to 2-decade highs against a basket of peers last week, vaulting more than 2% higher, with gains driven primarily by haven demand, despite the US economy unexpectedly shrinking in Q1.
This week, Wednesday’s FOMC decision is likely to be the market’s primary source of volatility, with the Fed set to raise rates by 50bps for the first time in over 20 years while also outlining plans to shrink the size of the balance sheet.
EUR
As with the pound, the common currency had a poor week last week, ending in the red for a fourth straight week, closing close to its weakest levels since early-2017, beneath the critical 1.05 mark.
The bears now look to be firmly in control of EUR/USD, especially with the eurozone economy remaining vulnerable to risks stemming from the war in Ukraine and possible further Russian sanctions.
This week’s economic calendar is somewhat on the quiet side, leaving the EUR to be again mainly driven by external events.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 3rd May | US | JOLTs Job openings | 11.27m | 11.19m |
| Wednesday 4th May | US | ADP Non-Farm Employment Change | 455k | 382k |
| Thursday 5th May | US | Federal Funds Rate | 0.50% | 1% |
| Friday 6th May | CAD | Unemployment Rate | 5.30% | 5.2 |
| Friday 6th May | US | Average Hourly Earnings | 0.40% | 0.4 |
| Friday 6th May | US | Non-Farm Employment Change | 431k | 390k |
World News
The Bank of England is set to raise interest rates in the UK to its highest level for 13 years, attempting to battle against rocketing inflation. Policymakers expect to increase the interest rate to 1% from the current level of 0.75%, a level not seen since 2009. Inflation forecasts are also expected to increase as the Ukrainian war increases the cost of living with spiralling costs of energy and fuel.
The EU is looking to step up its cooperation with African countries to reduce the reliance on Russian energy. The western part of Africa including countries like Nigeria and Senegal offer untapped potential for liquified natural gas which the European Union are keen to explore.
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7544.55 | 7544.55 |
| DAX | 13939.07 | 13958.92 |
| CAC40 | 6425.61 | 6463.73 |