May 15, 2025

“The UK economy beat expectations and its peers in the first quarter, posting 0.7% growth. With things looking bleaker ahead, though, sterling has struggled to benefit this morning. The focus today is on retail sales and inflation in the US.”

Sam Cornford – Head of Trading

USD

The dollar is struggling again today as the ‘liberation day’ hangover lingers, with losses concentrated against the safe havens. The vague news that US and Korean officials had discussed currency triggered a brief dip in USD yesterday, as markets speculated over whether dollar devaluation might be part of the various trade negotiations going on with countries across the world. The Trump administration affirmed that this was not a goal, but it is not without precedence and will remain at the back of traders’ minds. There are a three key pieces of data at 14:30 CET today. Retail sales are expected to have been flat on the month in April, PPI inflation looks likely to be relatively mild, and any spike in jobless claims would be a downside risk for the dollar. We also get a speech from Fed Chair Powell, who is probably quite satisfied with market pricing for only two rate cuts this year.

GBP

A surprisingly strong bout of growth in the first quarter has had little positive impact on sterling this morning. The UK economy outperformed both the US and the eurozone in Q1, growing 0.7%. That is surprising, considering the widespread gloom about the October budget’s tax rises, and that the BoE was originally projecting 0.75% full year growth. The only new information for sterling, though, was a slight beat on expectations with 0.2% m/m growth in March, and the solid pace in February will become less likely as trade frictions filter through to the hard data. It is also worth wondering whether there is a seasonal factor here that the ONS has not quite ironed out – Q1 2024 and 2022 were similar stories, before growth fell off during the remainder of the year.

EUR

The euro is occasionally venturing above the 1.12 mark, as markets continue to shun the dollar. Today brings an employment change report for the first quarter, expected at 0.1%, and a second estimate for GDP growth. The direct talks between Putin and Zelenskyy that were hoped to materialise in Istanbul today are not going ahead, with Russia sending junior officials instead. A peace boost for the euro might still be some way off, if at all possible.

Markets

Stocks were in consolidative mode in a day where there were no major catalysts, with the major European indexes slipping slightly as Wall Street eked out some small gains.

Main Economic Events (All Times CET)

3:30am: Australian Employment Change
8:00am: UK GDP
8:00am: Norway GDP
2:30pm: US Retail Sales, PPI & Unemployment Claims

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