USD Slumps on Soft CPI, GBP Struggles with Mixed Data, EUR Gains Ground.

• USD struggles as softer-than-expected CPI and mixed economic data fail to provide a clear direction.
• GBP pressured by a rise in UK unemployment and stagnant GDP, despite strong wage growth.
• EUR gains on positive industrial production and trade balance data, capitalizing on USD weakness.
• Fed’s cautious stance on interest rate cuts offers little support to the US Dollar.
• Sterling trades sideways towards the end of the week with limited economic data and BoE rate cut bets.

USD: The US Dollar (USD) started the week trading in a narrow range as the absence of significant market-moving data left the ‘Greenback’ without a clear direction. However, by Wednesday, the US Dollar experienced a sharp decline against most of its peers following the release of the latest US consumer price index (CPI). The CPI data revealed that headline inflation unexpectedly eased from 3.4% to 3.3% in May, undermining USD in the aftermath of the release. On Thursday, the ‘Greenback’ attempted to recoup some of its losses after the Federal Reserve’s latest interest rate decision. The Fed indicated it would only implement one interest rate cut this year, but this did little to boost the Dollar’s appeal. Moving into Thursday’s session, a surprising decline in US producer price inflation and an unexpected rise in jobless claims had minimal impact on USD investors, with the currency remaining steady for the rest of the week.

GBP: The Pound (GBP) commenced the week with little movement against its peers due to the lack of market-moving data, leaving Sterling without a clear direction. On Tuesday, the Pound came under fresh selling pressure following an unexpected rise in UK unemployment in April. Despite this, a stronger-than-expected wage growth report helped limit Sterling’s losses. Mid-week, the Pound continued to struggle after the release of the UK’s latest GDP data, which showed the British economy stagnated in April as anticipated. This data failed to attract investor interest, leaving GBP on the back foot. Towards the end of the week, the absence of new economic data resulted in GBP exchange rates trading sideways, with marginal support coming from delayed Bank of England (BoE) interest rate cut bets.

EUR: The Euro (EUR) began the week on a stable note, trading within a tight range as markets awaited key data releases. On Wednesday, the Euro gained traction against the US Dollar and other major currencies following the weaker-than-expected US CPI data, which highlighted a potential slowdown in inflationary pressures in the US. Additionally, the Euro was buoyed by better-than-expected industrial production figures from the Eurozone for April, which showed a modest increase and suggested some resilience in the region’s manufacturing sector. As the week progressed, the Eurozone’s latest trade balance figures showed a narrowing deficit, providing further support to the Euro. By the end of the week, the EUR maintained its gains, benefiting from a broader weakening of the US Dollar and positive domestic data releases.