Starmer is under increasing pressure following the local elections, and with German and US inflation data both due this week, currency markets could see meaningful movement. Here’s what to watch.
Latest market insights:
Starmer under pressure as Labour suffers local election losses:
Last week’s local elections delivered a significant blow to the Labour government. The party lost a large number of seats, and Prime Minister Keir Starmer is now facing mounting pressure both from within his party and from the public.
This morning, Starmer is set to address Labour MPs in an attempt to consolidate support and demonstrate that the government remains stable. But the question many are asking — and that currency markets will also be watching — is whether this speech is too little, too late.
Political uncertainty is one of the factors that can move Sterling. When confidence in a government weakens, it can create volatility in the pound — and that volatility can translate directly into the value of your international transfer.
Germany releases April inflation figures tomorrow
Germany is Europe’s largest economy, and its inflation data carries significant weight across Eurozone currency pairs. Tomorrow’s release covers April’s figures and will give markets an important read on how the region is performing.
A higher-than-expected reading could lend support to the Euro, as it may indicate that the European Central Bank (ECB) will need to keep interest rates elevated for longer. A softer reading could put pressure on EUR.
Either way, expect movement — this is one of the more reliably market-moving releases in the European calendar.
US inflation data due tomorrow — markets expecting 3.4%
US CPI (Consumer Price Index) data for April is due tomorrow afternoon — and it’s arguably the most closely watched monthly release in global currency markets. The consensus expectation is a reading of 3.4%, slightly above last month’s 3.3%.
As with any data release, the reaction in currency markets can go in either direction and isn’t always predictable. What matters is the relationship between the actual figure and what markets had already priced in.
• If inflation comes in above 3.4% — this could strengthen the US dollar, as markets may anticipate the Federal Reserve holding rates higher for longer.
• If inflation comes in below 3.4% — this could weaken the dollar, as it may signal that rate cuts are back on the table sooner than expected.
• An in-line reading — could still prompt movement if sentiment shifts around the Fed’s next move.
Eurozone GDP on Wednesday — a key health check for the European economy
Gross Domestic Product (GDP) measures the total economic output of a country or region. When Eurozone GDP data is released on Wednesday, it will give markets a comprehensive picture of how Europe’s economy performed in the most recent quarter.
This is a high-profile release. A stronger-than-expected reading tends to support the Euro; a weaker one can push it lower. With German inflation data dropping the day before, Wednesday’s GDP print will add further colour to the overall European picture.
If you have any transfer involving euros this week, pay close attention. The combination of German inflation data on Tuesday and Eurozone GDP on Wednesday makes the mid-week window particularly significant for eUR pairs.
If you have upcoming currency requirements or would like to discuss how these events could affect your plans, we’re here to help, contact Lumon on +44 (0)204 506 5672 for a free, no-obligation conversation and discover what options you have available to help.
