GBP
Sterling had a poor week last week, stumbling to its weakest since mid-2020, despite the Bank of England raising rates by 25bps, and some policymakers favouring an even larger move.
The decline came as a result of the BoE’s economic forecasts, seeing a peak in inflation of more than 10%, along with the economy being set to contract by 0.25% next year, raising the possibility of medium-term rate cuts.
Consequently, the pound notched a third straight weekly decline, and now looks vulnerable to further falls, with the BoE certainly one of the more dovish G10 central banks.
This week’s calendar is likely to provide little relief, with Thursday’s GDP report set to show the economy in rather poor health, before the full impacts of Russia’s invasion of Ukraine are accounted for.
EUR
Despite a broadly stronger dollar, the common currency ended last week in positive territory, snapping a four-week losing run, and continuing to trade above $1.05.
The EUR’s resilience stemmed from increasingly hawkish ECB commentary, with numerous policymakers touting the possibility of interest rate increases as soon as July, along with the deposit rate ending the year in positive territory.
However, the fragile nature of the eurozone economy, and its exposure to war in Ukraine, mean that any such policy tightening is far from being considered a ‘done deal’.
This week’s EU data docket is, besides a couple of sentiment surveys, rather barren in nature.
USD
As expected, the Fed raised rates by 50bps last week, while also guiding markets to expect further such rate hikes at both the June and July FOMC meetings, despite ruling out moving in larger increments.
This, coupled with broad risk aversion elsewhere, allowed the dollar to record another strong week, advancing for the fifth in a row against a basket of peers, and trading to new 2-decade highs.
Looking ahead, Wednesday’s CPI figures are likely to show that price pressures have peaked in the US, however they are unlikely to fade rapidly, thus meaning that significant near-term policy tightening will remain both likely and essential.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Wednesday 11th May | EU | ECB President Lagarde Speaks | ||
| Wednesday 11th May | All | OPEC Meetings | ||
| Wednesday 11th May | US | CPI m/m | 0.30% | 0.40% |
| Thursday 12th May | UK | Prelim GDP q/q | 1.30% | 1.10% |
| Thursday 12th May | US | PPI m/m | 1.40% | 0.50% |
| Friday 13th May | US | Prelim UoM Consumer Sentiment | 65.2 | 64.1 |
World News
HSBC faces mounting pressure as it’s biggest shareholer Ping An pushes for a split, which will be the biggest in banking history. HSBC’s decision to scrap dividends in 2020 infuriated Ping An as retirees and pension funds depend on the regular payouts. The bank has huge concerns over the proposal as a split could prove too complex with no guarantee of raising returns.
Retailer giant IKEA is set to spend over $3bn to modernise its existing stores and build new stores. IKEA are hoping the planned investment will boost their e-commerce as they attempt to take advantage of the move to online shopping, whilst increasing the number of distribution centres.
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7387.94 | 7387.94 |
| DAX | 13674.29 | 13624.92 |
| CAC40 | 6258.36 | 6207.15 |