Underlying Sterling sentiment remained weak during Thursday with further concerns over the UK outlook. The UK currency did attempt to rally after the European open, but struggled to make any headway even with gains in equity markets and a more stable risk tone. There were no data releases during the day and there was a significant element of caution ahead of next week’s Bank of England policy meeting. There were strong expectations that the bank would downgrade its growth forecasts and raise inflation forecasts. Even if the bank avoids a more dovish statement, there were still expectations that other central banks would be more likely to adopt a hawkish tone which limited potential Sterling support.
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The Euro was unable to sustain a limited corrective rebound on Thursday as underlying sentiment remained notably cautious. There were further concerns surrounding Ukraine developments, especially with on-going aggressive rhetoric from Russian officials while US President Biden asked Congress for another huge support package. German consumer prices increased 0.8% for April with the year-on-year increases at 7.4% from 7.3% the previous month which was above consensus forecasts of 7.2% and the highest rate since March 1974 which will maintain Bundesbank demands for a tighter monetary policy.
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09:00 Gross Domestic Product (QoQ) (Q1) Forecast 0.3% Previous 0.3%
09:00 Gross Domestic Product (YoY) (Q1) Forecast 5% Previous 4.6%
US GDP data was notably weaker than expected with an annualised first-quarter contraction of 1.4% for the first quarter of 2022 after 6.9% growth previously and below consensus forecasts of 1.1%. Consumer spending increased at a slightly faster rate for the quarter, but there was weakness in investment and government spending while there was a net contraction from trade and inventories also declined on the quarter. The prices index increased 8.0% for the quarter from 7.1% previously. Energy polices remained a key element with report that the EU was close to announcing a ban on Russian oil with the move phased in to lessen economic damage.
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