Sterling Steady as UK Trade Talks Brighten, but Growth Concerns Linger
GBP
Sterling traded within a relatively narrow range last week, showing modest upward momentum early on before surrendering gains towards the end of the week. A key supportive factor was renewed optimism surrounding the UK-India trade deal. Reports suggested significant progress had been made in negotiations, raising hopes that a long-awaited agreement could soon be finalised. A deal of this magnitude is expected to boost UK exports—particularly in services—which could support the pound in the longer term.
However, GBP’s gains were limited by softer UK GDP data. The economy grew by just 0.4% in Q1, barely recovering from last year’s stagnation. Combined with persistent inflationary pressures—especially in energy and services—this raised questions about the Bank of England’s next move. The market remains divided on whether the BoE will raise rates again or hold steady, given the delicate balance between inflation and weak growth.
Overall, the pound was caught between short-term macroeconomic concerns and long-term trade optimism, resulting in muted volatility for much of the week.
USD
The US dollar softened last week, weighed down by a combination of disappointing economic data and renewed geopolitical uncertainty. Retail sales and producer price index (PPI) figures came in below expectations, fuelling speculation that the Federal Reserve may be nearing the end of its tightening cycle—or even considering rate cuts if growth continues to weaken.
Adding further pressure was news that US-China trade negotiations had stalled again. Hopes for a breakthrough were dampened after President Trump warned of possible new tariffs on Chinese imports, accusing Beijing of backtracking on key commitments. This revived memories of the 2019 trade war and dented investor confidence. The resulting uncertainty reduced the dollar’s appeal, particularly as markets shifted towards safe-haven assets like gold.
EUR
The euro gained ground, supported by political stability across the Eurozone and a weaker dollar. Centrist victories in recent elections in Romania, Poland, and Portugal boosted investor sentiment. In addition, Germany’s trade surplus expanded significantly, with exports hitting an 11-month high—an encouraging sign for the Eurozone’s largest economy.
Gold & Silver
Gold prices rose by 0.4% to $3,216.29 per ounce, supported by a weaker dollar and renewed trade uncertainty. Moody’s downgrade of the US credit rating also boosted demand for gold as a safe-haven asset. Silver recorded a modest rise of 0.1%, closing at $32.31.
Key Economic Data: 19th–23rd May
United States
Monday, 19th May
- 3:00 PM: Leading Index (April)
- 3:00 PM: Coincident Index (April)
- 3:00 PM: Lagging Index (April)
Wednesday, 21st May
- 7:45 PM: S&P Global Manufacturing PMI (May, Preliminary)
Thursday, 22nd May
- 7:45 PM: S&P Global Services PMI (May, Preliminary)
- 7:45 PM: S&P Global Composite PMI (May, Preliminary)
- 8:00 PM: Existing Home Sales (April)
Friday, 23rd May
- 8:00 PM: New Home Sales (April)
United Kingdom
Monday, 19th May
- 7:01 AM: Rightmove House Price Index (May)
Wednesday, 21st May
- 7:00 AM: Consumer Price Index (CPI) (April)
- 7:00 AM: Core CPI (April)
- 7:00 AM: Producer Price Index (PPI) Input and Output (April)
- 11:00 AM: CBI Industrial Trends Survey (May)
Thursday, 22nd May
- 7:00 AM: Public Sector Net Borrowing (April)
Friday, 23rd May
- 7:00 AM: Retail Sales (April)
- 12:01 AM: GfK Consumer Confidence (May)
Eurozone
Friday, 23rd May
- 9:00 AM: Eurozone Consumer Confidence (May, Final)
- 9:00 AM: Germany IFO Business Climate Index (May)
- 9:00 AM: Germany IFO Current Assessment (May)
- 9:00 AM: Germany IFO Expectations (May)
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