Sterling was subjected to further selling before finally securing a correction.

There were further concerns over the Ukraine situation and risk of a further escalation, especially given the aggressive rhetoric from Russian officials.

US President Biden requested an additional $33bn in military and humanitarian support from Congress.

The Russian missile strike on Kyiv while UN Secretary General Guterres was in the city further inflamed tensions.

The EU moved close to a ban on Russian crude oil with overall energy developments a key issue and confidence in the Euro-zone outlook remained weak.

According to the advance reading, US GDP data contracted at an annualised contraction of 1.4% for the first quarter of 2022 after 6.9% growth the previous quarter and well below consensus forecasts of 1.1%.

Consumer spending increased at a slightly faster rate for the quarter, but there was weakness in investment and government spending while there was a net contraction from trade as imports surged and inventories also declined on the quarter.

The prices index increased 8.0% for the quarter from 7.1% previously.

Markets were still very confident that the Fed would tighten by at least 50 basis points next week, but underlying confidence in the US outlook took a slight dip.

Wall Street equities posted strong gains on Thursday with a significant element of short covering

US gains helped trigger a wider improvement in global risk appetite despite underlying reservations.

The dollar dipped briefly after the GDP data, but overall surged to a 20-year high as doubts over the US outlook were more than overshadowed by a lack of confidence in other major currencies.

Further strong selling in the Euro and yen also continued to boost the US currency with the dollar index briefly strengthening to a 20-year high. The dollar retraced further on Friday amid strong pressure for a correction.

German consumer prices increased 0.8% for April with the year-on-year increases at 7.4% from 7.3% the previous month which was above consensus forecasts of 7.2% and the highest rate since March 1974. There will be strong pressure for action from the Bundesbank to tighten policy.

Ukraine concerns were again a significant negative factor for the Euro and the currency remained under pressure amid fears over the Euro-zone outlook.

There was also further speculation that the ECB would not be able to respond to inflation pressures given the growth risks. EUR/USD dipped sharply to 5-year lows close to 1.0470, but did regain the 1.0500 level on Friday.

Sterling remained under heavy pressure on Thursday as confidence in the UK outlook continued to undermine confidence.

A strong rebound in equities did help provide an element of relief with GBP/USD attempting to regain 1.2500 on Friday.

The Swedish Riksbank announced an immediate increase in interest rates to 0.25%, contrary to expectations that policy would be on hold, and stated that there would be further increases this year.

Bond buying will be scaled back, and the buying of Treasury bills will stop immediately.

Markets continued to fret over Euro-zone energy security with Russia continuing to threaten to use energy exports as a weapon in the Ukraine conflict. Confidence in the Euro-zone outlook also remained notably fragile. Dollar strength was interrupted only briefly by the US GDP data on Thursday. The dollar index surged to a 20-year high but did hit a notable correction on Friday. EUR/USD dipped sharply to fresh 5-year lows near 1.0470 before a correction to 1.0540 on Friday.

The yen remained under pressure with USD/JPY at fresh 20-year highs just above 131.00 before a retreat to just below 120.50. The Swiss franc was resilient, although USD/CHF posted a fresh 22-month high above 0.9700.

Sterling was subjected to further selling before finally securing a correction. GBP/USD recovered from fresh 22-month lows near 1.2400 to trade above 1.2500. GBP/EUR held around 1.1870 but retreated from intra-day highs.

Commodity currencies came under renewed pressure amid dollar strength on Thursday, but with some relief from gains in equities and a sharper rebound on Friday as the dollar dipped. AUD/USD dipped back below the 0.7100 level before a strong recovery to 0.7160. USD/CAD surged to 1.2880 before correcting sharply to just below 1.2750 as oil prices increased.

Economic Calendar

Expected Previous
07:00 GBP Nationwide House Prices (Y/Y)(MAR) 14.30%
07:00 GBP Nationwide House Prices (M/M)(MAR) 1.10%
07:30 CHF Retail Sales (Y/Y)(MAR) 12.80%
08:00 CHF KOF Leading Indicator(APR) 100.8 99.7
13:30 USD PCE Core Price Index (Y/Y)(MAR) 5.50% 5.40%
13:30 USD PCE Core Price Index(M/M)(MAR) 0.30% 0.40%
13:30 Employment Cost Index 1.20% 1.00%
13:30 USD Personal Spending (M/M)(MAR) 0.70% 0.20%
13:30 CAD GDP (M/M)(MAR) 0.20% 0.20%
14:45 USD Chicago PMI(APR) 57 62.9
15:00 USD Michigan Consumer Sentiment(APR 01) 65.7 65.7

*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.