ChamberFX Weekly Brief
Keep up-to-date on foreign exchange developments and news with our brand new ChamberFX weekly briefs. These valuable weekly insights are provided by Andy Dobson and Damon Ellam, International Payments UK, MoneyCorp. Andy and Damon are our regional representatives and will be providing useful monthly FX forecasts to help chamber members with their currency strategies.
May 2024 Forecast by Damon Ellam
"Welcome to my monthly newsletter, where I try to distil all the information that I feel is important in FX markets into one place so that my clients can spend more time running their businesses.
The big market mover over the past month, both in FX and other financial markets, has been the reduction in expected interest rate cuts from the US Federal Reserve this year. In January, the market was pricing in US interest rate cuts of between 1.0 and 1.5% this year, while now we expect less than 0.5% in cuts. That change in expectation makes the US dollar more attractive to invest in over the course of this year and therefore the US dollar index has strengthened close to highs we saw in 2023. This contributed heavily to GBP/USD dropping to 1.2301 in April.
With a host of US economic data points beating expectations and with the US election coming up in November, the reality could be even less than 0.5% in interest rate cuts this year and this narrative, if it grows, could push USD even stronger through the next 6 months. The US CPI inflation figure on 15th May could again be the driver of USD volatility mid-month.
In May, amongst the usual monthly releases of high impact economic data, which you can see in my Risk Event Calendar below, we have a whole raft of central bank meetings over the coming weeks to look forward to. Most notably, the US Federal Reserve’s FOMC meet tonight and the Bank of England’s MPC meet on Thursday 9th May.
The Bank of England are currently expected to cut interest rates this year from the current 5.25%, by circa 0.50% to 4.75%, but no rate change is expected on 9th May. However, as we have seen from the US interest rate expectations, this can change very quickly dependent on economic data releases, and can quickly have a knock-on effect in FX markets. UK CPI inflation dropped to 3.2% in March (released in April) and we get the next reading on 22nd May. This figure especially which will be watched very closely by the markets and the Bank, and could cause some GBP volatility in the second half of the month.
As always, please do reach out to if I can help further with any FX trades or planning around the risk events I have highlighted."
Weekly FX Briefs
Contact
For further information and advice on Hull & Humber's ChamberFX, or for assistance with your currency strategy, please click here or contact Lorraine Holt at l.holt@hull-humber-chamber.co.uk or call 01482 324976.
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