GBP/USD
Yesterday, the Pound tripped up against the Dollar and gave away a small chunk of its gains, breaking the recent upwards trend. This came as an immediate result of the disappointing UK PMI prints, which showed that there was a steep decline of growth during May. This effectively further fueled the recessionary fears that the UK is having to battle with, weighing on the Pound. Furthermore, this data solidified the Bank of England’s sobering economic outlook and caused investors to peel back expectations of any interest rate hikes in the near future. So far into trading today, the Pound finds itself still licking its wounds from yesterday, with the rate sitting on the fence yet to make a decisive movement. As for the Dollar, it is also under a degree of pressure following new concerns for their economy. With global recessionary fears arising, many believe that the US is also set to enter a recession by next year which effectively capped the Dollar’s gains. The Dollar will however have an opportunity to advance against the Pound later today following the release of data on Durable Goods Orders. On top of this, the FOMC Minutes is also expected in the evening which may provide clarity to investors as to what the Fed’s approach to interest rate hikes will be. Back in the UK, the economic calendar is quiet today meaning the Pound may find itself vulnerable throughout the day.
GBP/EUR
As it currently stands, the GBP/EUR rate has recovered quite swiftly following its tumble yesterday, with the majority of the losses recovered. This comes after the UK printed poor PMI’s, indicating a contraction in service sector growth. This, coupled with fresh comments from ECB President Lagarde, allowed the Euro to climb rather notably against the Pound. Looking back to today, the Euro’s upwards growth has evidently run out of some steam and has fallen slightly against the Pound as a result. Euro investors are likely awaiting an array of ECB speeches that are expected shortly to see if they provide any clarity to their approach to interest rate hikes. Should these provide any hawkish statements, the Euro will likely be rewarded due to the bank having previously chosen to keep interest rates untouched. As for the UK, there is nothing worth noting scheduled on the economic calendar today meaning that the Pound may find it difficult to extend its gains.
Morning Update published by Frank Brightman (25/05/2022)