Last week was all about the UK, as the Bank of England hinted at interest rate cuts and GDP expanded by much more than expected in the first quarter. Now it’s the US’s turn to hog the limelight in what could be a crucial week for the Federal Reserve.
Currency markets didn’t betray much emotion when confronted with last week’s action. Even news that the UK had formally exited its brief recession didn’t cause much in the way of movement as the US dollar’s strength helped it plug any losses.
After the Bank of England suggested rate cuts in June weren’t out of the question, the Bank’s chief economist tried to contain overexcitement. Echoing governor Bailey’s comments, Huw Pill said focusing too much of June as the start of the loosening cycle would be ‘ill advised’.
All in all, sterling lost just over half a cent to the euro and the US dollar over the course of last week. EUR/USD peaked and troughed a few times but ultimately played out a stalemate to finish the week largely unchanged.
On Friday, the University of Michigan consumer sentiment fell to its lowest in six months in May’s preliminary read. The headline figure fell to 67.4 from 77.2 last month, as consumers feared that inflation, unemployment and interest rates were moving in the wrong direction.
Sterling managed to keep its head down and have a quiet week last time out. That will probably be chalked up as a win given the risks associated with key data and interest rate decisions. However, as is always the case when dealing with currency markets, you never can tell when more volatility will be heading down the pipeline.
Here’s what to look out for this week…
The UK will report its unemployment figures for March on Tuesday, which also brings the German ZEW Economic Sentiment Index, US PPI and a high-profile speech by Jerome Powell.
Wednesday is the key day for the Federal Reserve as a slew of US inflation data arrives.
We’ll then see US building permits and initial jobless claims on Thursday before the week ends on a quieter note.
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