EM market report

Sterling attempting to stabilise

Thanim Islam
Thanim Islam 10 May 2022

GBP: Sterling attempting to find its feet

EUR: Euro stabilising despite geopolitical risks

USD: Dollar sold as Bostic says 0.5% rate hike is aggressive enough

Sterling 

Sterling had a mixed day yesterday aiming to get out of oversold territories against its peers.

MPC member Saunders spoke yesterday stating that he sees neutral rates between 1.25% and 2.50% but could see this range higher should inflation expectations rise higher. Interestingly,  he did not comment on how this could affect growth like Governor Bailey has done. He also went to say that whilst he voted for a 0.5% hike before this does not imply that he would vote in a similar fashion in the future.

More cost-of-living crisis headlines this morning with the British Retail Consortium reporting that sales in April fell by 0.3% - the first decline in 15 months. No impact on the pound this morning though.

Sterling moves likely to be dictated by risk until we have the GDP report on Thursday.

Euro 

The euro still looks very supported at the moment with the euro only down against two of the major currencies over the last five days. Further upside could be limited though as the EU still looks to fully embargo Russian oil; however Hungary seems to be the stumbling block opposing any decision. Brussels and Budapest will be resuming talks today.

Latest ZEW survey will be out from Germany this morning with figures set to show another drop in May on account of high energy prices and geopolitical risk. Hawkish ECB member Joachim Nagel and neutral members Francois Villeroy and Luis De Guindos will be speaking today.

USD 

We saw some profit taking on the dollar yesterday after Feds Bostic commented that he feels that 0.5% rate hikes are aggressive enough now and that higher rate hikes would not be necessary.

Today we have a barrage of Fed speakers: the neutral John Williams and Tom Barkin, dove Neel Kashkari and hawks Loretta Mester and Christopher Waller.

Market rates 

Today's Interbank Rates at 09:40am against sterling movement vs yesterday.

Euro

€1.167 ↓

US dollar

$1.233 ↑

Australian dollar

$1.772 ↑

South African rand 

R19.89 ↑

Japanese yen 

¥160.4 ↓

Have a great day.