Last week, Sterling traded sideways after mixed UK data. The Q1 GDP print confirmed that the UK economy grew by just 0.1%, avoiding recession but offering little momentum. Unemployment edged higher to 4.3%, while wage growth slowed to 5.3%, easing pressure on the Bank of England (BoE) to act quickly. These releases reinforced expectations for a cautious BoE rate path after May’s 0.25% cut. GBP/USD bounced around 1.32, capped by renewed dollar strength late in the week, while GBP/EUR moved back above 1.18.
This week, markets will look to UK inflation data (CPI) on Wednesday for direction. Headline CPI is forecast to dip below 2.0%, which could encourage further BoE easing later this year. Retail sales (Friday) and PMIs (Thursday) will also be key—soft prints may pressure sterling. A drop in services PMI would be particularly impactful given the UK’s services-led economy. With limited BoE commentary expected, economic releases will drive GBP positioning.
GBPUSD – 1.3277
GBPEUR – 1.1855
Last week, the euro remained stable, with EUR/USD holding above 1.11. Germany’s ZEW sentiment index declined more than expected, reflecting investor concern over trade risks and sluggish growth. Final Eurozone CPI confirmed a slight rise in core inflation to 2.8%, but ECB officials indicated they remain committed to easing if needed. Markets still see a possible rate cut in June, especially if data worsens. EUR/GBP saw mild gains, helped by softer UK wage data.
This week, Flash PMI surveys (Thursday) across the Eurozone will be closely watched. Manufacturing has shown tentative signs of bottoming out; further improvement would support the euro. ECB President Lagarde is due to speak on Friday—investors will be alert for any guidance ahead of the June policy meeting. Unless there’s a notable upside surprise in PMIs, EUR may trade defensively, especially against a firm USD.
EURUSD – 1.1199
EURGBP – 0.8435
Last week, the U.S. dollar rebounded strongly mid-week after CPI inflation came in hotter than expected at 3.4% y/y, and core inflation held at 3.6%, dampening Fed rate cut bets. Retail sales surprised to the upside, reinforcing the narrative of U.S. economic resilience. Fed officials reiterated a “data-dependent” stance, with no rush to cut. The dollar index moved back above 105, pressuring both EUR/USD and GBP/USD.
This week, focus will shift to the Fed’s May meeting minutes (Wednesday) and S&P Global PMIs (Thursday). Any hawkish tone in the minutes could bolster the dollar further, especially if coupled with firm business activity data. Ongoing uncertainty around U.S.-China tariffs remains a wildcard—positive developments could weaken USD as risk appetite returns. For now, the Fed’s higher-for-longer stance keeps the dollar well-supported.
GBPUSD – 1.3277
EURUSD – 1.1199
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*Interbank rates are correct at 7am on the date of publishing.
