Weekly Market Report

Sterling traded in a relatively tight range last week but generally saw some weakness against both the Euro and Dollar. UK CPI inflation came in broadly in line with expectations, reinforcing expectations that the Bank of England may not rush into an aggressive interest rate cut. However, softer growth signals continue to limit Sterling’s upside.

In the US, the FOMC meeting minutes released on Wednesday highlighted a cautious stance on easing policy too quickly. The resilience of the US labour market continues to support the Dollar.

In the Eurozone, economic data remains mixed. Inflation pressures have cooled, but growth momentum across France and Germany remains subdued. The ECB is maintaining a cautious tone, with markets weighing up the timing of a potential policy adjustment later this year.

What this may mean for businesses

Short term swings around economic data continue to have an impact:

o USD strength remains supported by relative labour market resilience

0 EUR sentiment remains tied to growth data and ECB commentary

0 Sterling continues to react to UK inflation data and interest rate expectations

o Timing around known payment dates and can materially influence final conversion levels.

In this type of environment, some clients have reviewed the use of forward contracts to provide cost certainty on upcoming payments, whilst others have utilised market orders to target specific levels within existing ranges.