Key Points
Both EU and US set to raise interest rates this week.
Non-Farm Employment Change set to show it’s smallest increase since February 2021.
Poor sentiment towards USD has helped boost EUR.
Market Update
GBP
Sterling gained ground last week, notching its best week against the dollar since mid-March, as the greenback continued to face headwinds amid growing expectations of a more dovish stance from the FOMC at this week’s meeting.
However, cable’s gains again ran out of steam just north of the 1.25 handle, showing that the bulls probably need a further catalyst in order to break more convincingly towards the highs seen last summer.
This week, attention is likely to focus outside the UK, with the domestic data docket rather quiet, besides the final reads on last month’s PMI surveys.
EUR
The common currency also advanced against the greenback last week, chalking up its 7th weekly gain in 8, and briefly tagging the 1.11 handle for the first time in over a year.
The EUR continues to be helped by rather poor sentiment towards the USD, in addition to continued hawkish ECB rhetoric, with the widening policy divergence between each side of the Atlantic continuing to propel EUR/USD higher.
Looking ahead, this week presents plenty of event risk; the ECB are set to raise rates by 25bps on Thursday, and maintain a hawkish stance, while traders will also pay close attention to the latest bank lending survey and inflation data, both due Tuesday morning.
USD
The dollar continues to find few buyers, with last week’s solid corporate earnings slate and subsequent rally in equities also denting the attraction of the greenback, in addition to softer than expected Q1 GDP figures.
Against a basket of peers, the USD lost ground for the 6th week in 7, though the DXY has thus far managed to remain above 101; the bears are likely to get a little more excited were that level to give way.
A bumper economic docket awaits this week, giving traders plenty to chew over; the FOMC are set to hike by 25bps on Wednesday evening, though such a move will likely represent the end of the current tightening cycle. Meanwhile, the latest ISM PMI figures will be closely watched for continued signs of economic resilience, while economists expect Friday’s labour market report to show a further 180k jobs having been added to the economy in March.
World News
BP have announced profits of $5bn in the first quarter, $700 million higher than analysts forecasted. Shareholders have been rewards with a 6.6 cent per share dividend up from 5.4 cents last year. However, these unexpectedly high profits have led to calls for them to pay higher taxes with households facing higher bills. This comes after BP saw record profits last year, as well as the entire sector following rapid price rises due to the Russian-Ukraine war.
The government are expected to agree to give NHS staff in England a 5% pay rise following the strikes and disruption over the past months with workers calling for pay rises. The government and BHS officials will meet representatives with 14 unions, where they will reveal whether a majority of the members are in favour of the deal, which also incorporates a one-off lump sum payment. This is said to be the best and final offer from officials.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 2nd May | US | JOLTS Job Openings | 9.93m | 9.74m |
| Wednesday 3rd May | US | ISM Services PMI | 51.2 | 51.8 |
| Wednesday 3rd May | US | Interest Rate Decision | 5.00% | 5.25% |
| Thursday 4th May | EU | Interest Rate Decision | 3.50% | 3.75% |
| Friday 5th May | US | Non-Farm Employment Change | 236k | 180k |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7870.57 | 7870.57 |
| DAX | 15922.38 | 15950.36 |
| CAC40 | 7491.5 | 7466.82 |