Published: 21/05/2025 By ECAP
Bearish Outlook
The British Pound surged to a 2025 high against the U.S. Dollar after UK inflation rose more than expected to 3.5% in April, with services inflation hitting 5.4%. However, concerns over stagflation and weak equity markets limited gains against the Euro. Nevertheless, this boosts the case for keeping interest rates higher for longer, supporting the Pound.
The Euro held steady, supported by optimism around the UK–EU summit and stable Eurozone inflation data. In fact, core inflation in the Eurozone rose to 2.7%, while headline inflation remained at 2.2%, reinforcing confidence in the currency. However, the Euro may face pressure if Germany’s producer prices continue to decline.
The U.S. Dollar remains under pressure amid ongoing concerns over trade uncertainty, weakening investor sentiment, and a recent downgrade of the U.S. credit rating by Moody’s. Ultimately, analysts expect limited short-term recovery, with a bearish outlook over the longer term due to potential rate cuts by the Federal Reserve and capital rotation away from US assets.
Data supplied by GC Partners