May 16, 2022

Daily Report 16/05/2022

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The British pound was pressured by Thursday’s softer UK macro data, which reaffirmed a bleak economic outlook and suggested that the Bank of England’s rate hike cycle could be nearing a pause. Elsewhere, concerns remain over PM Boris Johnson’s approach towards altering the NIP with hopes of a change in the European Union’s position. The UK government is expected to reveal plans for unilateral changes in NIP on Tuesday.

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N/A BoE Monetary Policy Report Hearings

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The Euro remained stable against the Dollar from Friday through to early Monday but struggled slightly against Sterling. On Friday industrial production figures were released and came in above consensus forecasts of -2 at -1.8 and below previous of 0.5. ECB members Schnabel and De Guindos both spoke in recent days although neither revealed any further clues as to future guidance.

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Markets have turned risk-averse at the start of the week following the risk rally witnessed on Friday. The disappointing macroeconomic data releases from China, coronavirus-related concerns and heightened fears over a global economic slowdown allow safe-haven flows to continue to dominate the markets. The data from China showed earlier in the day that Retail Sales contracted by 11.1% on a yearly basis in April, missing the market expectation for a decline of 6% by a wide margin. Additionally, Industrial Production narrowed by 2.9% in the same period, compared to analysts’ forecast for a growth of 0.7%. Meanwhile, the city of Shanghai announced that coronavirus controls will remain in place due to the high risk of a rebound in infections even though five out of the city’s 16 districts have reported no cases. All of this is contributing towards the ongoing Dollar strength.

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