Key Points
Manufacturing and Services PMIs due on Tuesday for UK, EU and USA.
US GDP expecting no change on Thursday.
USD continuing to build investor confidence.
Market Update
GBP
The pound lost ground for a second week last week, once more languishing below the $1.25 handle, briefly touching near one-month lows, as the dollar continued to gain ground across the board
Last week was relatively light on data, or other UK-specific catalysts, though the latest labour market report did paint a rather concerning picture, with rising unemployment and earnings growth close to 6% pointing to further risks of the economy falling into ‘stagflation’
This week, however, things are considerably busier; markets have a full slate of releases to digest, including the latest inflation, retail sales, borrowing, and PMI reports, all of which will feed into the ongoing debate around whether the BoE will plump for a 13th straight rate hike next month
EUR
The common currency also faced headwinds last week, dipping beneath the $1.08 handle for the first time since late-March, before managing to recover some ground as the week drew to a close
Nevertheless, the EUR has now fallen around 3% in as many weeks, as traders become increasingly pessimistic on the eurozone’s economic prospects amid softening Chinese data, despite a plethora of ECB speakers maintaining their hawkish rhetoric
Looking ahead, a whopping 18 ECB speakers are due, giving investors plenty to chew over, in what is otherwise set to be a quiet week for scheduled releases, besides Tuesday’s ‘flash’ PMI reports
USD
The greenback continues to find plenty of demand, last week chalking up its first consecutive weekly gains against a basket of peers in a couple of months
A range of factors remain behind the dollar’s resurgence, including ongoing global growth concerns, as well as a hawkish repricing of Fed policy expectations, with front end yields having risen over 20bps last week, and the market having priced out around a third of the loosening that was expected in H2, after hawkish comments from a range of policymakers, including Chair Powell
In the week ahead, investors will pay close attention as to whether the aforementioned hawkish repricing can continue, with Friday’s core PCE release (the Fed’s preferred inflation gauge) being the data highlight
World News
The government has sold £1.2bn of NatWest shares, reducing its ownership by around 3%. The state now holds a 38.6% stake in NatWest compared to owning 84% in 2008 during the global financial crisis. The government is aiming to sell all its interest in the bank by 2026, as the bank moves towards privatisation.
Facebook’s parent company Meta is expected to face record fine following it’s transfer of European data to US servers. The fine is anticipated to be larger than Amazons £647 million fine for its infringement of EU privacy standards. The trans-Atlantic data transfers have raised concerns as they could leave European’s exposed to the weaker US privacy laws.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 23rd May | EU | Flash Manufacturing and Services PMIs | ||
| Tuesday 23rd May | UK | Flash Manufacturing and Services PMIs | ||
| Tuesday 23rd May | US | Flash Manufacturing and Services PMIs | ||
| Wednesday 24th May | UK | CPI y/y | 10.10% | 8.20% |
| Thursday 25th May | US | Prelim GDP q/q | 1.10% | 1.10% |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7756.87 | 7756.87 |
| DAX | 16275.38 | 16235.98 |
| CAC40 | 7491.96 | 7467.93 |