GBP Surges on UK Growth, USD Rally Slows, EUR Softens Against Renewed Dollar Demand.

  • GBP rallies against Euro and Dollar on strong UK economic growth in Q1 2024.
  • USD’s exceptionalism narrative fades, prompting JP Morgan to advise reducing long exposure.
  • EUR softens against renewed USD demand, with focus on US economic data.
  • GBP-to-Euro exchange rate hits 1.1630 after UK GDP beats expectations.
  • USD’s top-performing status in 2024 wanes, while EUR/USD pair trades lower amidst Dollar demand.

GBP: British Pound Surges as UK Economy Shows Resilience

The British Pound has soared against major currencies like the Euro and the Dollar following a robust rebound in UK economic growth in the first quarter of 2024. The Office for National Statistics reported a 0.6% quarter-on-quarter increase in UK GDP, surpassing expectations and signaling a strong recovery. Economists, such as Simon French from Panmure Gordon, are optimistic about the UK’s growth prospects, with some revising their estimates upwards. Despite experiencing negative growth in the final two quarters of 2023, today’s data confirms that the UK’s recession was brief and shallow. With year-on-year growth at 0.2% in Q1, higher than anticipated, the likelihood of a June rate cut has diminished, boosting Sterling further. The Pound to Dollar exchange rate has also climbed above 1.25, indicating a potential stabilization following recent volatility. While there are lingering challenges such as productivity and manufacturing issues, the overall sentiment suggests a more optimistic outlook for the UK economy.

USD: Dollar Rally Showing Signs of Fatigue

The Dollar’s recent rally appears to be losing steam as the narrative of US exceptionalism fades, according to analysts at JP Morgan. While the Dollar remains a defensive currency with carry advantages, signs of fading exceptionalism coupled with crowded positioning and valuation concerns have prompted a tactical reduction in USD exposure. Despite being the top-performing currency in 2024, the Dollar’s outperformance has waned since late April, fueled by softer-than-expected domestic data and reduced expectations of interest rate cuts. However, uncertainties surrounding US inflation and the global economic recovery caution against premature bearishness, especially with upcoming US elections on the horizon.

EUR: Euro Softens Amid Renewed Dollar Demand

The EUR/USD pair is trading lower, supported by renewed demand for the US Dollar amidst hawkish remarks from Federal Reserve officials. Market focus now shifts to the release of the US Michigan Consumer Sentiment Index for May, with expectations of a decline. Technically, EUR/USD remains within a descending trend channel since mid-December 2023, although the 14-day RSI indicates potential upside momentum. Key resistance levels include the 1.0790–1.0800 region, followed by subsequent barriers at 1.0885, 1.0943, and 1.0981. On the downside, support levels lie at 1.0724, 1.0650, and 1.0600, with a break below signaling further downside potential towards 1.0500.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.