GBP/USD
To kick off the day, the Pound has already found itself having to deal with renewed pressure following the release of underwhelming economic data earlier this morning. The data in focus was an array of GDP statistics, with the majority of them coming in under consensus. This of course has had an immediate effect on the Pound, effectively pushing the rate all the way down to fresh 24-month lows. On top of this, figures for Industrial Production and Manufacturing Production for March disappointed investors. These new figures coupled with the BoE’s sobering assessment of the UK economy are now sounding alarm bells for many, with fears of a recession growing by the day. On the other hand, the Dollar is benefitting from the recent inflationary figures released in the States. The two figures came in above consensus, with it showing that inflation in their economy was sitting near 40-year highs at 8.3%. This helped boost the hawkish expectations of the Federal Reserve to maintain its aggressive interest rate hiking. With the bulk of the important data from both sides done for this week, it is unlikely that the Pound will find much momentum to recover its losses. For the rest of the day, it is predicted that the rate may continue to edge lower.
GBP/EUR
At the start of the day, the Pound was slightly down against the Euro as it was battered following the disappointing GDP statistics, with the majority of the data coming in under consensus. Since then, the Pound has made a slight recovery against the Euro, with it being able to print some minimal gains. This is, however, still not enough upwards movement for the rate to be clear of the current lows it finds itself trapped in. The current movement of the Pound is likely to be short lived but has been facilitated by investors questioning the growth of the Euro as it faces headwinds from the ongoing war in Ukraine. Adding to the current volatility of the rate, newly emerging Brexit disagreements are making it increasingly difficult for the Pound to climb. This comes as the European Union showed their readiness to suspend trade deals with the UK if the Northern Ireland Protocol is revoked. As for the rest of today, the economic calendar for both sides is rather uneventful meaning the rate will mainly focus on overall market sentiment.
Morning Update published by Frank Brightman (12/05/2022)