Eurozone inflation skyrockets
Tuesday 31 May, 2022
Daily Currency UpdateGBP/USD attempted to push up slightly higher yesterday off the back of some extended US dollar weakness. The pair was up at 1.2655, 0.18% higher for the day, having risen from lows of 1.2616 earlier in the day. Last week's £15bn fiscal stimulus package has helped provide the pound with some extra support, which has helped keep the pound propped up for now. The shortened week in the UK means that there is very little market moving data due for the pound this week.
Key MoversThe US dollar remains under continued pressure, as it fell once more against most of its major rivals during yesterday's session. The dollar index – which measures the US dollar against a basket of its major rivals – fell 0.3% across the day yesterday and has dropped by 1.5% across May, yet it still remains up 6% for the year. The fall in the dollar is in part due to the more upbeat market mood. This was triggered by China announcing that they would begin to lift their COVID-19 related restrictions this week as planned – after over one month in a lockdown. The better market mood means that investors are flocking towards riskier assets and currencies, weighing heavy on the US dollar.
German price pressures were revealed yesterday and hit a multi decade high. Annual inflation topped out at 7.9% while the monthly inflation reading came in at 0.9%, with both figures beating expectation. These latest inflation figures will cause the ECB further problems in regard to their response to dealing with inflation via higher interest rates while attempting to leave monetary policy loose enough to allow further growth within the economy. All in all, EUR/USD is back to the levels it was at around 5 weeks ago, currently hovering around the 1.0750 mark. This has been caused in part by a weaker dollar and a stronger euro, which has posted gains of around 2.2% through the month of May – its biggest monthly rise in a year.
- GBP/USD: 1.2580 - 1.2685 ▲
- GBP/EUR: 1.1715 - 1.1795 ▼
- EUR/USD: 1.0720 - 1.0815 ▼
- GBP/AUD: 1.7505 - 1.7590 ▼