The pound achieved its biggest weekly gain since December 2020 against a weakening dollar, despite the April consumer price index (CPI) which showed inflation rising to the highest level in 40 years.
However, robust jobs market numbers and better-than-expected retail sales data propelled the UK currency above the 1.25 benchmark – a two week high.
The dollar ran out of steam last week following its recent flight to safety fuelled surge that has seen it rise in value in all but two of the last 14 weeks against a basket of major currencies.
PMI numbers in focus for the pound
The UK economic calendar is light this week, with the latest manufacturing and services PMIs – both released on Tuesday – the only data sets of note.
Manufacturing activity – which edged up last month after slowing to its weakest in just over a year in March – is forecast to slip lower in May.
British private-sector growth – which slowed to its weakest pace in four months in April – is expected to have eased again in May.
The only other economic indicator slated for release from the UK economy this week is the Rightmove house price index on Monday.
Bank of England governor Andrew Bailey will make a closely watched speech on Monday, with investors hoping for clues about the policy tightening outlook after he defended the central bank’s response to rising prices last week. Bailey insisted inflation was being fuelled by global forces that restricted the Bank’s room for manoeuvre.
FOMC meeting minutes in focus for the dollar
In contrast to the UK, a slew of influential data sets are scheduled for publication in the US this week. Manufacturing and services PMIs kick things off on Tuesday – with the services reading a key gauge of recession risks.
On Wednesday, core durable goods orders will attract investor attention ahead of jobless claims and GDP numbers on Thursday.
The world’s largest economy contracted by 1.4% on an annualised basis in the first quarter of the year. The second GDP reading is not expected to deliver any material change.
At the end of the week, the core personal consumption expenditures price index and personal spending numbers will also impact the dollar and market risk sentiment.
The Federal Open Market Committee May meeting minutes are published on Wednesday and will be scrutinised for rate hike signals after the US central bank lifted borrowing costs by 50 basis points this month.
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