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Markets await Eurozone CPI

Daily Currency Update

GBP/USD has picked up this morning after coming close to touching 1.24 yesterday afternoon. Improving stock market sentiment has come to the pound’s aid on the back of some encouraging words from the Chinese government pledging to support the economy on the back of recent COVID-19 lockdowns. As mentioned before, the main event next week will likely be the Bank of England's policy meeting on May 5th. Markets are seeing a 50/50 chance of a 50bp interest rate hike to try and control inflation. However, hiking rates in the face of a slowing economy is a tricky balancing act for the Bank. Governor Andrew Bailey's messaging about the future path of rates and the economy’s ability to handle this in the face of soaring consumer costs will likely be the key area of focus. GBP/USD is at 1.2525 with GBP/EUR at 1.1870.

Key Movers

Today’s top tier data comes from the Eurozone with the first estimate of inflation for April due this morning, with an uptick to 7.5% predicted. Like in the UK, soaring inflation and a slowing economy means policy makers are facing a conundrum of how much they can raise rates without bringing growth to a standstill. The other main factor the Eurozone is dealing with is the possibility of Russia turning off its gas supply to more countries. So far only Poland and Bulgaria have been affected (which each have their own currency) however should they decide to turn off German supplies then we could be looking at a huge economic shock which could tip the world’s 4th largest economy into recession. It appears some countries, including Italy, are prepared to pay in Rubles. However the ongoing conflict in Ukraine and the potential further action from Vladimir Putin creates ongoing uncertainty for Europe and the wider world, despite today’s rally in stock markets. EUR/USD is up to 1.0550.


Expected Ranges

  • GBP/USD: 1.2425 - 1.2600 ▲
  • GBP/EUR: 1.1820 - 1.1925 ▼
  • GBP/AUD: 1.7460 - 1.7620 ▼
  • EUR/USD: 1.0500 - 1.0625 ▲