Asset Summary – Friday, 16 May
GBPUSD is demonstrating upward momentum following the release of robust UK GDP figures, which have tempered expectations for aggressive interest rate reductions by the Bank of England. The stronger-than-anticipated growth data is supporting the pound, as traders reassess the likelihood and extent of future rate cuts. Additionally, a weakening US dollar, driven by speculation of currency manipulation in trade talks, is providing further tailwinds for the GBPUSD pair. While mixed signals persist from other UK economic indicators like unemployment and wage growth, the positive GDP surprise is currently outweighing these concerns, suggesting a potential for continued, albeit possibly volatile, appreciation in the near term.
EURUSD is demonstrating a bullish trend, primarily driven by a weakening US dollar following disappointing inflation figures and escalating uncertainty surrounding US-China trade relations, even with the agreed-upon truce. Although both nations are striving to reach a comprehensive agreement, the persistence of high tariffs is generating market apprehension. Simultaneously, the Euro is gaining strength from revised expectations regarding the European Central Bank’s monetary policy, with markets anticipating a higher deposit facility rate by the end of the year. Despite this, the market largely expects a rate cut in June to stimulate growth amid the impact of US tariffs. Comments from ECB policymakers reflect a mixed outlook, with some suggesting further rate cuts are possible, while others remain optimistic about achieving the inflation target, contributing to the complex dynamics influencing the currency pair.
DOW JONES is positioned to open near flat as US stock futures indicate a stable start. The index experienced a positive performance in the prior session, climbing 0.65%, buoyed by ongoing optimism surrounding US-China trade negotiations and receding inflation concerns. However, downward pressure could stem from weakness in the broader health care sector, triggered by UNH’s significant decline. Positive movement in individual stocks such as GE may provide some offsetting support. Investors will likely weigh the impact of wholesale price declines and corporate warnings regarding potential tariff-related price hikes from companies like WMT.
FTSE 100 experienced a mixed trading day, ultimately closing higher but facing headwinds from several sectors. Gains in heavyweight stocks like AstraZeneca, HSBC, and Unilever provided upward momentum. However, declines in 3i, triggered by concerns over Action’s performance, and Sage Group, following disappointing revenue growth, limited the index’s advance. Furthermore, lower oil prices negatively impacted BP and Shell, dragging on the overall performance. The stronger-than-expected UK GDP growth may temper expectations for aggressive interest rate cuts by the Bank of England, potentially influencing future trading activity and investor sentiment towards the index.
GOLD is facing downward pressure as reduced trade tensions between the US and China diminish its safe-haven appeal, leading to a weekly price decline. While a ceasefire between India and Pakistan further reduces geopolitical risk, stalled negotiations between Russia and Ukraine are providing limited support. US inflation data, which supports the expectation of Federal Reserve rate cuts, would typically benefit gold, but Federal Reserve Chairman Jerome Powell’s warning about potential future inflation volatility is adding uncertainty. This uncertainty could complicate the Fed’s monetary policy decisions, thereby creating headwinds for gold’s value despite the prospect of lower interest rates.