GBP/USD
The Pound has struggled to continue its uphill climb against the Dollar with the market open today, cutting short its upwards trend. As it currently stands, the rate is sitting back up at the near levels it was perched on at the start of this month. These recent gains have been facilitated by a recent flip to a risk-on market mood, meaning that the Pound has found itself with an increase in demand. These gains have, however, been largely capped by the still lingering recessionary fears in the UK. With experts warning that the UK is on track to enter a recession in the third quarter of 2022, it is likely that this will act as a headwind for the Pound for an extended period of time. To make matters worse, the UK economy is also under intense pressure as it battles soaring inflation, with it now sitting at a record-breaking 9%. Now looking at the Dollar, it finds itself struggling as the demand for its safe haven status is not as prevalent as it was in comparison to recent months. On the other hand, the Dollars losses are being capped as global recession fears build up and is also finding additional support in the hawkish outlook for their Federal Reserve. As for economic data today, the UK has just released a fresh set of PMI reports. These have failed to meet consensus by quite a large margin, exacerbating recent losses. As for the rest of the day, a flurry of data from the US is expected, leaving the Pound open to fall even further.
GBP/EUR
Both yesterday and so far today the rate has fallen quite sharply, knocking it back down to weekly lows. This downwards movement is likely down to the Euro fighting back after it has been rewarded with renewed support as markets look at the ECB to begin looking at interest rate hikes. This comes after there was an unexpectedly hawkish tone in the ECB’s recent monetary policy meeting in April. The rate has also found itself being impacted following new Brexit disagreements, with fears of a disruption in trade between the UK and EU. For trading today, important data releases have already played a notable role in deciding where the rate trades at. Just now a PMI Flash from the UK has also been released, revealing underwhelming figures that failed to meet consensus, causing the Pound to fall even further against the Euro. As for the rest of the day, it is quiet on the data front other than a speech from ECB President Lagarde, leaving the Pound vulnerable to more losses.
Morning Update published by Frank Brightman (24/05/2022)