The second part of May 2018 is now underway and some interesting economic events could have a big influence on the currency market. In the following sentences, we will try to highlight some of them and also we will try to anticipate some of the influence they might have on the market.
Inflation in the UK
On May 23rd inflation figures from the United Kingdom will be released and those people investing in sterling pairs will definitely need to be prepared for the event. Inflation had been retreating lower in the last two months, diminishing the probability of a new rate hike from the Bank of England. The last CPI figure, year on year, came at 2.5% down 0.2% from the figure we saw in March. For the month of May, analysts estimate a value of 2.7%, but you must consider the fact that the actual numbers had missed expectations for the last three months in a row, all numbers being below expectations.
If the inflation will show continuing signs of weakness, the sterling could continue to be under pressure, especially against the US dollar. Only better than expected figure could boost sterling, but at this point, that seems very unlikely to happen.
Also, after the inflation figures, GDP will follow also. People investing in sterling should be interested in those figures, as well.
Political and geopolitical tensions
Besides the economic calendar, there are a few other events that could influence the currency market. Recent hard talks from Italy, where the first two parties are struggling to form a government is one of the key factors that had driven the euro down recently. If the situation won’t find an end, the pressure is expected to continue on the single currency.
Recently, the US President, Donald Trump, had decided to get out of the Iran nuclear deal, sparkling new tension in the region. Also, his decision to move the US embassy to Jerusalem was another hit for the markets. It seems like the US is alone in this move, all the EU members denying to do the same with their embassies.
Hard negotiations lie ahead, and safe-havens could be favored by the political tensions. We expect these political situations to play a much important role than the economic calendar, so watch closely how the situation will evolve over time.
