By Noam Bennaiche
Markets enter the new month with the UK political landscape firmly in focus, alongside a pivotal few weeks ahead for the central banks in Europe, the UK, and the United States.
The US dollar is finding modest support at the start of the week, underpinned by the transition to a new Federal Reserve leadership team. Kevin Warsh was sworn in as the 17th Chair of the Federal Reserve on 22 May, inheriting today a challenging backdrop of elevated inflation, high mortgage rates, and historically weak consumer sentiment. His first policy meeting is scheduled for 17 June, with interest rates widely expected to remain unchanged at 3.50%–3.75%. Warsh’s commitment to stronger inflation control and a more clearly defined central bank mandate is being interpreted as broadly supportive of the dollar.
The British pound has been the most notable underperformer in the G10 FX complex over the past week. GBP/USD is trading around 1.3456. Against the euro, GBP/EUR is holding near 1.1530, supported by the 175-basis-point interest rate differential between the Bank of England and the European Central Bank.
The euro begins the month on a firmer footing, with markets pricing in a 25-basis-point ECB rate increase on 11 June, which would lift the deposit rate from 2.00% to 2.25%. Expectations have been reinforced by May flash inflation readings, which continue to show accelerating price pressures across France, Italy, and Spain.
Today’s economic calendar is relatively light. Market attention remains focused on the upcoming central bank decisions, while the US–Iran ceasefire and oil prices continue to be key factors for all three major currency pairs.
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1st June, Key Events
3:30pm: ISM manufacturing (USD)
Key dates ahead for this month:
ECB 11th June
FOMC 17th June
BoE 18th June