Welcome to August Exchange's weekly market updates. We share insights every week, keeping you ahead of data releases, geopolitcal tensions and all things currency exchange.
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As we step into the latter half of May, the global currency exchange landscape continues to be shaped by a mix of softer inflation prints, cooling economic momentum, and ongoing geopolitical tension. Last week's cautious tone in equity markets and risk assets underscores a market searching for fresh direction. This week brings several key data points that could influence short-term FX sentiment, particularly for GBP, USD, EUR and G10 currencies.
UK: Inflation and Retail Sales in Focus
The standout release this week is UK CPI on Wednesday. With the Bank of England closely monitoring inflation trends, any deviation from expectations could shift rate expectations and drive GBP volatility.
A hotter-than-expected reading could fuel speculation of a more cautious BoE stance, while a softer print might open the door for a summer rate cut.
On Friday, we also get UK retail sales – a key read on consumer resilience, which could help shape market sentiment for sterling ahead of the long weekend.
US: Fed Speeches and PMIs
No top-tier US data is due, but comments from Fed officials including Waller and Bostic will be closely watched for any shift in tone around inflation and policy patience.
Flash PMIs on Thursday will offer insights into economic momentum heading into June, particularly after last week’s mixed CPI and retail sales data. A surprise either way could impact dollar positioning.
Eurozone: PMI Watch
Like the US, the Eurozone Flash PMIs (Thursday) will be critical for gauging economic health across the bloc.
While rate cuts remain expected this summer, stronger data may moderate dovish expectations and add support to the euro.
G10 Currencies: Movers to Watch
AUD: The RBA interest rate decision lands Tuesday, followed by RBA minutes and PMIs. Markets expect a hold, but any surprise language could move the Aussie, especially amid concerns over China's slower demand.
CAD: Inflation data on Tuesday could be pivotal. A strong print may challenge recent dovish BOC expectations and boost CAD.
JPY: Yen remains under pressure. BoJ's tolerance for weakness is being tested, and markets remain wary of potential intervention.
Geopolitics & Sentiment Drivers
Markets remain sensitive to ongoing developments in US-China trade relations and Middle East tensions, both of which influence risk appetite and demand for safe havens like USD and JPY.
After recent gains, global equity markets are treading water. Any renewed sell-off could shift FX positioning toward defensive plays.
Currency Exchange Perspective
Recent GBP/USD and EUR/USD moves have seen swings of around 1% over short periods, reiterating the value of having a defined currency exchange strategy. With inflation data and central bank speak driving price action, there’s plenty of scope for volatility this week.
At August Exchange, we help clients navigate these moves—whether locking in favourable rates or mitigating exposure through tailored hedging solutions. If your business is exposed to cross-border payments, this is a week to stay alert.
Did You Know?
As of 2024, daily FX trading volume globally surpassed $7.5 trillion, making it the largest and most liquid financial market in the world.
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