ChamberFX Weekly Brief
Keep up-to-date on foreign exchange developments and news with our ChamberFX weekly briefs and monthly newsletters. These valuable insights are provided by Damon Ellam, International Payments UK, MoneyCorp. Damon is our regional representative and will be providing useful monthly FX forecasts to help chamber members with their currency strategies.
May 2025
"Welcome to my (slightly early) May newsletter. I hope you find it useful and informative.
Please see below my thoughts for this month, a calendar of the upcoming FX market risk events to watch out for in May, and interest rate & FX rate predictions.
Canadian Dollar (CAD): With Prime Minister Mark Carney’s Liberals winning the Canadian federal election this week, my January prediction that “Pierre Poilievre will be the Canadian Prime Minister before October” was clearly off the mark. The Canadian public's strong reaction to US President Trump’s trade tariffs and his comments about making Canada America’s “cherished 51st state”, combined with the entry of former Bank of England Governor Carney into the race, enabled the Liberals to overturn a 20-point poll deficit and win the election.
This result should be positive for the Canadian Dollar this year, as Carney has proven capable of standing up to pressure from Trump. Given the slight warming of relations in the last 48 hours, we might see trade tensions between the two countries fade over the coming weeks and months.
Australian & New Zealand Dollar (AUD & NZD): The next significant election this year is the Australian federal election this weekend, with results expected by Monday 5th May. According to polls, Prime Minister Anthony Albanese is likely to win re-election, which I believe would positively impact the Australian Dollar by providing stability during these uncertain times. If Albanese secures a consecutive term, he will be the first Australian leader in over two decades to achieve this.
Additionally, affecting AUD & NZD this month, the Reserve Bank of Australia meets on May 20th and the Reserve Bank of New Zealand meets on May 28th. Both are widely expected to cut interest rates by 0.25%, so there shouldn’t be too much volatility unless they decide not to cut rates.
Sterling (GBP): Critically important for many individuals and businesses across the UK is the Bank of England meeting this month on 8th May. The BOE are expected to cut interest rates by 0.25% to 4.25% next Thursday, and a further 0.50% in cuts this year to take us to a base rate of 3.75%.
The pound’s rise against USD has been good news for many importers this year, although countered by the 3% drop in GBP/EUR, however the volatility and uncertainty in FX markets and global supply chains can’t be good for business. The UK economy has been skirting on the right side of the news cycle with inflation staying low and GDP in growth, but with higher national insurance contributions for businesses and the base rate of 10% US trade tariffs coming into effect, we could very quickly see that narrative turn.
I feel that GBP’s position, especially against USD, is not sustainable in the long-term based on UK data alone. However, it is also true that GBP is in the backseat when it comes to driving the direction of GBP/USD as a currency pair, so this is around 80% dependent on US factors than the UK data, which leads me nicely on to…
US Dollar (USD): The entire FX market is largely driven by the US dollar – that is true now more than ever!
Trump’s trade tariffs, the forecasted state of the US economy, and the flow of money out of the US dollar as a “safe haven” is driving the US dollar lower this year (GBP/USD and EUR/USD higher!). This narrative is strong and consistent at the moment but can shift quickly as we have seen very clearly over the past six months.
The US Federal Reserve also meets on 7th May and are not expected to cut interest rates this time round despite pressure from President Trump on the Fed Chair, Jay Powell. The Fed are however expected to cut rates later this year at a similar pace to the UK of circa 0.75% total in 2025.
If you’d like to discuss strategies for your business or need insights on navigating the upcoming risk events, please get in touch.
Best regards,
Damon"
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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