May 20, 2025

“The dollar is trading on the softer side again today. The UK-EU summit yesterday failed to have a meaningful effect on markets just yet, and instead the focus is on the US’ fiscal outlook.”

Sam Cornford – Head of Trading

USD

The downbeat mood on the dollar is back this morning, although it did manage to claw back some of its downgrade-related losses late yesterday afternoon. The Moody’s decision meant that equities initially took a hit at yesterday’s open, and the 30-year yield breached the 5% threshold for the first time since January, but both markets recovered relatively quickly. Trump was filled with optimism following his two-hour call with Putin yesterday and announced that direct Ukraine-Russia talks towards a ceasefire would commence ‘immediately’. It is not clear that the market is any more hopeful about peace, however, and so for now it has had little impact. We get a flood of Fed speakers this afternoon, as well as the beginning of the G7 meetings between finance ministers and central bankers in Banff, Canada, where there is a possibility for tweaks to their understanding on FX policy.

GBP

While GBP/USD was back touching the 1.34 level yesterday, the last-minute UK-EU deals yielded little positive impact for sterling against the euro. Few of the major headlines – on fisheries, youth mobility, e-gates, and agriculture, among others – pointed to any materially closer economic integration with the EU, which appears to be what the market wants. The BoE’s Chief Economist Huw Pill speaks today, after dissenting at the previous decision to vote for a rate hold. We can expect him to skew to the hawkish side today, and that might aid the pound’s upward momentum against the dollar this morning. Tomorrow morning also brings the UK CPI report for April, which is likely to jump back above 3% as a result of regulated prices.

EUR

The movement in the euro has been bumpy in recent days, but it is trading 1.3% higher compared to Friday afternoon. Investors have been shying away from the dollar for several months now, of course, and the Moody’s credit downgrade seemed to be the next excuse to move allocations towards Europe. There are speeches from Knot, Wunsch, and Cipollone today, and the main data is the flash consumer confidence figure for May. The consensus is for a slight improvement compared to April.

Markets

Despite the likes of the S&P 500 sinking 1% at the open amid the downgrade gloom yesterday, investors eventually brushed the decision off and most major averages ended the day marginally in the green.

Main Economic Events (All Times CET)

6:30am: Reserve Bank of Australia Decision
2:30pm: Canada CPI
4:00pm: Eurozone Consumer Confidence

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