Mid-Week Summary: May 21-25

By Nikolas Xenofontos

EUR/USD

The Euro (EUR) commenced the week with a downward slide against the US dollar (USD), following Friday’s rebound off the 5-month low at 1.2641. The single currency then managed to rise and narrow the gap, recording a high at 1.2824 after news from the G8 meetings in Chicago improved market sentiment. Market participants are expected to closely monitor Wednesday’s Eurozone economic summit, ahead of Thursday’s speech at the Bank of Italy by ECB President Mario Draghi. Risk aversion will be impacted positively or negatively depending on what decisions, if any, are taken and this may move the EUR/USD pair higher or lower.

GBP/USD

The British pound (GBP) rallied against the US dollar (USD) to halt the sizeable drop of the past week. Investors can expect the minutes of the UK’s Monetary Policy Committee (MPC) meeting to be released on Wednesday, following Tuesday’s announcement of an improving Public Sector Net Borrowing figure and lower-than-expected annualised inflation at 3.0% - compared to an expected 3.1%. The minutes will reveal details of the Bank of England’s rate decision two weeks ago and will set the GBP/USD pair’s tone for the rest of the week. Thursday’s announcement of inflation-adjusted GDP will provide a useful piece of data for drawing up medium-term scenarios for the pair..

EUR/JPY

The single currency surged above its 4-month low at 100.21 recorded on Friday against the Japanese yen (JPY). It rose up to 101.76 as risk aversion in the previous week faded. Wednesday is the pivotal day for the pair as the Bank of Japan (BoJ) will announce its lending rate, release its Monetary Policy Statement and hold a press conference. The press conference is expected to draw worldwide attention, with hints on the BoJ’s future policy anticipated. Any comments on whether easing is a consideration will push the pair accordingly.

EUR/GBP

The euro (EUR) versus the British pound (GBP) had a quiet start to the week, which saw the single currency rebound from the consecutive multi-year lows recorded over the past weeks. The pair will be influenced by the Eurozone economic summit on Wednesday and the speech by the ECB president on Thursday, weighed against the release of the UK’s MPC meeting minutes on Wednesday and the inflation adjusted GDP figure on Thursday. It will be interesting to see if the recent rise of EUR/GBP is a sustainable trend or a minor reversal of a larger strong downtrend.

USD/CHF

The week commenced with the US dollar (USD) weakening against the Swiss franc (CHF). On Monday the pair recorded a low at 0.9367 which appears to act as a support level. The rise of USD/CHF over the past few weeks has been impressive and the break though 0.9335 has added to the trend’s momentum. As long as the price remains above this level, depending on news releases and commentary by the US Fed and the Swiss National Bank, investors should expect the trend to continue. Nevertheless, a catalyst is needed for this, which appears more likely to be provided by the greenback.