Financial Services

Structural Risks

Posted on by Will R
The British Pound gained substantial strength against the US Dollar, lifted by weakness in the greenback due to trade tensions, shifting investor sentiment, and concerns over U.S. economic policies. Analysts see potential for continued gains, supported by the UK’s lower exposure to tariff risks and the improving global market sentiment. While resistance may slow momentum, Sterling remains well-supported and could see further upside in the near future.

 
The Euro strengthened midweek, benefiting from a weakening U.S. Dollar and steady Eurozone PMI data, despite a dip in the services sector. Unlike the UK, where PMI dropped sharply, the Eurozone’s stability supported the single currency. Investors also showed interest in the Euro amid signs of U.S. capital repatriation. Looking ahead, Germany’s Ifo index may influence the Euro, depending on the strength of upcoming economic indicators.

 
The U.S. Dollar continues to face mounting pressure from multiple fronts, including concerns over the economic impact of tariffs, political interference in monetary policy, and fears about the stability of US assets. As investor confidence erodes, the Dollar has struggled despite occasional rebounds. Ultimately, analysts now see structural risks and a long-term downtrend emerging, fuelled by global shifts away from US dominance and toward alternative reserve currencies.

Trade Disputes

Posted on by Will R
The British Pound remained under pressure despite a global risk recovery during yesterday’s trading session. In fact, the GBP/USD exchange rate hit a one-month low, with further losses expected before potential stabilization. Moreover, the Pound also fell to an eight-month low against the Euro. Ultimately, domestic concerns, including the Bank of England’s likely interest rate cuts, added to the downward pressure, as market uncertainty grew.

 
The Euro strengthened against the U.S. Dollar and the British Pound, driven by global uncertainties. Despite the volatility, the Euro benefitted from market adjustments and risk appetite recovery. In fact, the rise reflected a shift in investor sentiment as market participants sought safer assets amidst concerns over trade conflicts and economic disruptions, with the Euro emerging as one of the stronger currencies in the current environment.

 
The U.S. Dollar weakened by 0.7% during last night’s trading session amid rising global tensions, particularly US-China trade disputes. Fears of a full-scale trade war, with new tariffs set to take effect, contributed to market volatility. Additionally, growing speculation that the Federal Reserve may cut interest rates multiple times this year further pressured the Dollar, as concerns about the US economy’s stability intensified in response to ongoing trade disputes.

Global Uncertainties

Posted on by Will R
The British Pound has shown steady performance, particularly against the Euro, where it has recorded three consecutive weekly advances. However, this momentum remains vulnerable to volatility, especially with global uncertainties surrounding U.S. tariffs. Ultimately, the British Pound is expected to remain in a tight range ahead of Trump’s tariff announcements, with potential gains if the tariffs are less severe than expected, or losses if the news causes further global instability.

 
The Euro is facing uncertainty as markets brace for U.S. tariff announcements. Investor sentiment is cautious due to fears that the tariffs could disrupt global trade, with potential implications for the Eurozone economy. Ultimately, the Euro’s direction will depend on the severity of the tariff measures. Moreover, upcoming German and Eurozone inflation data may influence expectations regarding European Central Bank actions, including possible interest rate adjustments.

 
The U.S. Dollar has faced pressure due to concerns over President Trump’s upcoming tariffs. In fact, the Dollar Index has been largely steady but is on track for quarterly losses. Investors are worried that the tariffs, set to target all countries, could lead to inflation and slow growth in the US. Ultimately, as fears rise, the Dollar remains vulnerable, with analysts predicting a potential rebound if tariffs are harsher than expected.

 

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Market Uncertainty

Posted on by Will R

The British Pound is under pressure due to the UK’s growing debt, weak economic growth, and rising debt servicing costs. Ahead of the Spring Statement, concerns mount about whether Chancellor Rachel Reeves’ proposed £15 billion in public spending cuts will be sufficient. As the Pound holds steady against the Euro and US Dollar, analysts warn that insufficient fiscal action could lead to higher debt costs and further economic challenges for the UK.

The Euro weakened as it faced pressure following mixed PMI data. Manufacturing in the EU showed strength, particularly in Germany, but services remained weak in countries like France. This uneven economic performance raised concerns about growth, and the Euro’s decline was further influenced by expectations of upcoming US tariffs on April 2. These factors combined to weigh on the Euro amidst broader global market uncertainty.

The U.S. Dollar remained steady after four consecutive gains, with the Dollar Index holding at 104.29. Analysts highlighted the Federal Reserve’s cautious stance on rate cuts, which supported the greenback. With the upcoming US tariff implementation on April 2nd, concerns about potential market volatility are growing, particularly regarding the selective tariff policy that could impact global trade.

Structural Changes

Posted on by Will R
The British Pound traded sideways against most peers amid a lack of notable UK economic data. In fact, Sterling sentiment remained mixed due to concerns about the UK economy’s recovery, despite government efforts to boost growth. The focus is shifting to the upcoming BoE interest rate decision, with investors cautious about potential volatility in the British Pound’s value ahead of tomorrow’s announcement.

 
The Euro faces challenges as Germany’s massive spending plan fails to push the currency higher. In fact, despite hopes for economic boosts from increased government spending, analysts remain cautious. Structural reforms are necessary for sustainable growth, and the Euro could retreat if the fiscal impact is delayed or fails to meet expectations. Ultimately, the market’s optimism may fade as the spending plan’s real effects take time to materialize.

 
The U.S. Dollar struggled ahead of the Federal Reserve’s policy update, with investors wary of potential surprises. While the Fed is expected to hold rates, any cautious tone or hints about future rate cuts could weigh on the greenback. Ultimately, the Dollar’s performance has been affected by economic uncertainties, and market participants are closely watching the Fed’s guidance for signals of future policy direction.

Risk Aversion

Posted on by Will R
The British Pound traded sideways after a strong rally against the U.S. Dollar and a sharp drop against the Euro. Investors are confident the Bank of England will maintain a restrictive policy due to strong wage growth, fuelling inflation in the services sector. Looking ahead, traders are focused on upcoming UK economic data, including GDP and factory figures, to assess economic strength.

 
The Euro has gained attention following Germany’s fiscal stimulus package, signalling a shift toward growth considerations over U.S. tariff threats. However, while fiscal measures in Europe could help mitigate tariff impacts, the potential for a continued Euro rally is limited, as market sentiment shifts away from the dollar amid broader economic challenges.

 
The U.S. Dollar weakened amid concerns over a global economic slowdown and rising trade tariffs, with the Dollar index hitting a four-month low. Speculation about a potential U.S. recession, along with weak labour market and consumer sentiment data, contributed to the decline. Attention now shifts to upcoming U.S. inflation data for further insights into the economy and interest rate changes.

Trade Developments

Posted on by Will R
The British Pound recovered substantial ground against the U.S. Dollar after the London Summit, supported by a rally in European currencies. Looking forward, trade developments, US tariffs, and economic data will be key this week. Ultimately, ING expects the Pound to stay supported in the short term but anticipates pressure from the upcoming UK budget statement.

 
The Euro strengthened against the U.S. Dollar yesterday, driven by optimism over potential peace talks between Ukraine and Russia. In fact, European leaders are taking the lead in pushing for a peace deal, which supported the euro’s recovery. However, inflation data and upcoming European Central Bank decisions could impact the euro, with expectations of a rate cut to stimulate the eurozone economy, which has been struggling with stagnation.

 
The U.S. Dollar steadied after yesterday’s losses as investors awaited the imposition of higher tariffs by President Trump. These tariffs, targeting China, Canada, and Mexico, are expected to increase U.S. inflation but benefit the Dollar in terms of trade and geopolitical interests. However, concerns over a potential economic slowdown and weakening consumer confidence limited the Dollar’s support.

Market Update: Currency Movements and Investor Sentiment

Posted on by Will R

GBP Struggles Amid Fiscal Concerns

Yesterday, the British Pound faced a challenging start as concerns over the UK’s fiscal health and potential tax increases unnerved investors. The anxiety came ahead of Chancellor Rachel Reeves’ address to Parliament, where she was expected to outline the government’s fiscal plans. Despite the initial volatility, reassurances from Cabinet Officer minister Pat McFadden that no tax announcements were imminent helped to calm the markets, reducing some of the pressure on the GBP.

EUR Remains Static Amid Lack of Data

The Euro struggled to capitalize on the Pound’s difficulties, primarily due to a lack of significant economic data from the Eurozone. Investors in the EUR were hesitant to make bold moves ahead of critical data releases later in the week, including the Eurozone’s GDP figures for the second quarter and July’s inflation data. These upcoming reports are expected to provide more direction for the common currency.

USD Finds Support Ahead of Federal Reserve Meeting

The U.S. Dollar managed to regain some ground, driven by anticipation of the upcoming Federal Reserve meeting. Investor speculation centered on whether the Fed would signal any rate cuts, with soft inflation readings and dovish comments from Fed officials bolstering expectations of a 25 basis point cut in September. This anticipation led to increased flows into the greenback, reinforcing its position in the market.

Looking Ahead

As the week progresses, investors will be closely monitoring key economic indicators and policy announcements. For the GBP, continued clarity on the UK government’s fiscal strategy will be crucial. The EUR will likely see more movement post the release of the Eurozone’s economic data. Meanwhile, all eyes will remain on the Federal Reserve’s actions and signals, which will be pivotal for the USD’s trajectory.

Stay tuned for more updates as we continue to track these developments and their implications for the foreign exchange market. For personalized advice and detailed market analysis, please contact our team at Synergy Exchange.

Sunny start to the month for Sterling

Posted on by Wordpress Admin

Good Morning, with sunny weather week ahead, UK slowly returns to normality, the currency markets continued to worry last week about the impact of this on inflation and whether Central Banks will be too tardy in their response.

The Royal Bank of New Zealand and the Bank of Canada signaled their intentions to raise rates in 2022, as Dr. Gertjan Vlieghle, a Bank of England’s Monetary Policy Committee member, voiced his concerns. His comments helped sterling spike back towards $1.4200, the top of its recent range, even though his remarks were heavily caveated, However, with the markets shut for holidays yesterday, Friday became the de facto month-end, and rebalancing unsettled the dollar, and it has continued to weaken this morning.

As customary for the first week of the month, the data docket is dominated by the unemployment reports released throughout the week culminating in the all-encompassing non-farm payroll employment report on Friday. The euro has opened at $1.2220 this morning. The Eurozone releases its inflation data ahead of the European Central Bank’s next meeting on 10th June with the central bank prevaricating over their next steps.

UK

Last week, the pound put in a good performance against most of its peers, and this looks set to continue with its opening at €1.1640 this morning. It responded as we said earlier, to the comments from the Bank of England whilst ignoring the political fallout from Dominic Cumming’s testimony about the handling of Covid. London is gradually returning to work, and the comments from Andrew Bailey and his colleagues to the Treasury Select Committee of the House of Commons, on Thursday, will be followed closely for any signs of hawkishness as will his speech this evening. Apart from the testimonies, it is another quiet week for data in the UK apart from the final readings of the Purchasing Manager’s Indexes starting today with those from the Manufacturing sector and followed on Wednesday with Services

Euro

As with all economies, markets are studying inflation and employment data for clues to recoveries and subsequent tightening of rates. This week, it’s the turn of the Eurozone to publish their reports, starting today with the release of its Core and Headline Inflation data for May. After yesterday’s Consumer Price Index releases across the continent, these may surprise the upside. We will also be keeping an eye on German Unemployment data released as this hits your mailbox. The response from European Central Bankers is limited as they enter into a week-long verbal blackout from Thursday before their next council meeting on 10th June. Also released this week, the European Markit Purchasing Managers Indexes start today with their Manufacturing and followed with the other sectors during the week. Tomorrow sees German Retail Sales for April reported as well as April’s Eurozone Producer Price Index. Also released is a report concerning the euro’s international role, which should show the growing use of the single currency on the international stage and may add a little strength to the single currency.

US

After Personal Consumption Expenditure came in slightly higher than expected at 3.1% on Friday, there was some selling of US Bonds, exacerbated by the reports of President Biden unveiling a $6tln budget, leading to higher yields and making the dollar more attractive. It will be interesting to watch how the market trends this week ahead of the key non-farm payroll data released this coming Friday. The 266,000 jobs created in April disappointed the market the last time the figures were reported. This data set will be closely studied for anomalies as there seems to be demand for workers, with supply that is the problem. Before the Non-Farm data, ADP will release their private-sector employment report tomorrow, not always the most reliable indicator, and the weekly Jobless claims on Thursday. Apart from the unemployment data, the ISM business surveys are also out.  A busy schedule of speakers from The Federal Reserve awaits us.

Scandi

The Swedish krona was pretty much rangebound against the euro, and there were no major movements despite data showing that wages increased by 0.1% on a month-on-month basis. Today we will get the Swedbank PMI Manufacturing data and, later in the week, the Current Account Balance and the Budget Balance.  Most traders and market participants expect the delayed krona bull run to make steam this month after May turned out to be one of the least volatile months ever with movements within a 10 öre range against the euro and pretty much a 5 öre range against Sterling.

The Norwegian krone weakened throughout May, and its impressive bull run has been somewhat halted despite rumours about a potential rate hike come September. This week we will get the DNB PMI Manufacturing data followed by the Current Account Balance figure on Wednesday.
We would like to encourage our clients and partners trading with any of the Scandinavian or Nordic countries to start preparing for the month-long summer holiday starting after Midsummer. Should you wish to speak to one of our regional experts about how flows over the summer could be managed most effectively, reach out to your  Account Manager or reply to this email directly.

Is inflation rearing its head?

Posted on by Wordpress Admin

Good Morning, in an upbeat end to the holiday-shortened week saw sterling (inflation) gain against the dollar above $1.4025, where it has opened this morning.

Several factors helped the pound rally; firstly, the Bank of England presented very upbeat forecasts for both the economy and the level of unemployment as the UK continues to ease successfully out of lockdown. Secondly, the Conservative party performed better than expected in the local elections. Thirdly the dollar fell quite sharply after Friday’s employment data was much worse than expected. Against the euro, the pound traded in a narrow range as the gyrations in the dollar market caused technical adjustments to pricing, and it has opened this morning virtually unchanged at €1.1550.

Over the weekend, election results continued to be announced including, those for both Scotland and London. As expected, London was held by the Labour party, but with a weaker endorsement than previously, and in Scotland, the SNP just failed to capture a majority, but this will not stop them from pushing for a second independence referendum. However, with Boris Johnson holding a strengthened mandate South of the border, he is likely to play hardball over the independence referendum. This week the market will be watching as tensions increase over the post-Brexit trade deal, which flared up into a confrontation over fishing off the shores of Jersey last week. Looking forward, we expect the market to carry on digesting last week’s events before the release of Gross Domestic Product in the UK on Wednesday. There is also a full data docket in the US to look forward to, including inflation as measured by the Consumer Price Index (CPI), which will be keenly watched as a sharp rise is predicted by some analysts.

GBP

After the excitement of the local elections, fishing disputes, and the Bank of England’s meeting last week, it looks like we have a slightly calmer time ahead. The only data of any real import being the announcement of both the Gross Domestic Product (GDP) for the first quarter. As the country has been able to return to its favourite occupation of shopping since lockdown partially ended, expectations are for a good figure. We will also watch the vaccination figures as we approach a further milestone on the roadmap to exiting lockdown the reopening of indoor entertainment next Monday, which will give the economy an additional boost. Alongside the GDP figure released on Wednesday, the latest Manufacturing and Industrial Production data will also be announced. Finally, the Bank of England could expand on last week’s economic forecasts when Governor Andrew Bailey speaks both tomorrow afternoon and Thursday evening. Increasingly his words will be studied for any sign of tightening as pent-up demand hits the economy causing fears of inflation to increase.

Euro

The euro has been performing well against the dollar and has opened this morning at $1.2150 against the greenback. Much of this gain came Friday afternoon after the Non-Farm payroll number in the US led to heavy selling of the dollar. Helping the euro strengthen is the feeling that Europe has now turned a corner in its fight against Coronavirus. Hopefully, it will be able to salvage its summer vacation period and, in doing so, revive its decimated service sector. It’s an extremely quiet week for data up ahead in Europe, and the US data releases will drive the direction of the euro against both the dollar and sterling. There is very little on the data docket this week, and much of Europe will be closed on Thursday for the Ascension Day Holiday. We will keep an eye out for the ZEW surveys on economic sentiment in Germany due tomorrow and its Consumer Price Index on Wednesday, but these rarely move the euro.

US

The Non-Farm Payroll numbers released last Friday were much lower than the consensus expected and resulted in an immediate and continued sell-off in the dollar as the US’s recovery miracle was called into doubt. In addition, the employment data supported the Federal Reserve’s policy of leaving rates lower for longer, encouraging the risk-on mood that took hold Friday afternoon. The dollar’s movements are likely to dominate the currency markets with a US-centric data-heavy week ahead. There are no major data releases due until Wednesday when April’s Consumer Price Index (CPI) is released, which is expected to show a jump to nearly 4% in the inflation rate, which will pressure the Federal Reserve to tighten policy. After the CPI data, it will be interesting how well received the issuance of $41bn 10-year Treasury notes is at the afternoon’s auction. On Thursday, the weekly jobless number is released, and on Friday, April’s Retail Sales and Industrial Production are published.

Scandi

The Swedish krona finished the week off on a strong note against most G10 currencies gaining more than 1% against the EUR on Friday. It was mainly buoyed by the poor non-farm figures rather than any Swedish-related macro data. Monday begins with the Housing Price Indicator for April, and Wednesday will see the latest CPI figure. The latter is expected to come in at 2.2%, 0.2% above the Riksbank’s target, and the first time in more than two years, it has reached these levels.
The Norwegian krone was mainly rangebound throughout most of last week with no significant data releases. Today the latest CPI figures are released and are expected to come in at 3.1%. Norges Bank has a target of 2%, which would further Governor Olsen’s case for a rate hike come September, we will also watch the GDP figures released on Wednesday.

Have a great week.
Synergy Team