A bad week for the US Dollar

By Nick Harrison

The US saw some pretty weak data come through this week in the form of worse than expected inflation data.  The CPI figure is the change in the price of goods and services purchased by consumers and is the key figure that indicates the inflation rate in that country.  The month-on-month figure fell to 0.3% against a predicted 0.4% and that coupled with a flat retail sales figure really changed market sentiment against the USD.  Only a few days ago, we saw the GBP/USD rate price at around 1.23, but this week’s swing in sentiment has now seen that rate hit just shy of 1.27.  The significance of this change in sentiment is that investors are now betting that the US will be the first of the 3 major currencies (USD, EUR & GBP) to cut their interest rate.  A strong economy and a sticky inflation indicates that country will keep their interest rate on hold for longer, so this week has now changed that sentiment and put the USD on the back foot.

Meanwhile, the Euro and Pound have just sat back and watched the show.  Economic data from both regions has been quite scarce this week, so the GBP vs EUR has continued to see quite a tight trading range below the 1.17 level.  There has continued to be strong resistance around 1.17 and this has been because the Eurozone has posted some positive economic data recently.  The GDP growth in the Eurozone matched the first estimate of an increase of 0.3% in the first quarter of this year and this has been the strongest growth since the third quarter of 2022.  Industrial production rose 0.6% against a forecasted 0.5%, so for the time being, the Euro seems to be flavour of the month for investors.

How quickly sentiment can change though, and we round off the week with the Bank Of England’s MPC Member Catherine Mann speaking this morning.  Sometimes the central bank members can raise a few eyebrows with their rhetoric about inflation and monetary policy, so watch out for potential market movement later.

Also in the Eurozone, the final year on year inflation figures are released at 10am today so, again, be prepared for some potential market volatility.

A host of US FOMC members will speak later this afternoon which will complete another week in the currency market.

Next week we will see some more important economic releases come through, so make sure you are speaking to our Currency Consultants to see how this will affect the cost of your currency requirements.

Next Week

Tuesday at 6pm – Bank Of England Governor Baily speaks

Wednesday at 7am – UK CPI (Inflation figure)

Wednesday at 7pm – US FOMC minutes released

Thursday – Manufacturing & Services data released across EU, UK & US

Friday – UK Retail Sales at 7am

Friday – US Consumer Sentiment at 3pm