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BoE MPC member Swati Dhingra explained her decision to vote for a larger 50bps rate cut at the May 8 meeting as a deliberate signal about the UK's economic outlook.

Speaking in an FT interview, Dhingra said she wanted to send a "more categorical statement about where I think the economy is headed," noting that using such a larger move sparingly increases its impact on market expectations.

Her vote, along with Alan Taylor’s, diverged from the majority who supported a more measured 25bps cut.

SNB Chair Martin Schlegel warned that the outlook for Swiss inflation remains highly uncertain and reiterated that the central bank could not rule out a return to negative interest rates.

Speaking at an event overnight, Schlegel said while such rates were an extraordinary measure, they had previously achieved their intended effect when used between 2014 and 2022.

“The uncertainty is currently enormous,” Schlegel said, citing volatility in both USD/CHF and EUR/CHF, adding that “investors are seeking a safe haven in stormy times,” which has put upward pressure on the Swiss franc.

Separately, Schlegel addressed concerns about global asset shifts, emphasizing that US treasuries remain foundational to global markets despite rising uncertainty. “There’s no current or foreseeable alternative to U.S. treasuries,” he said, citing their liquidity and dominance.

Key Highlights

• GBP/USD started a decent increase from the 1.3250 zone.
• It cleared a key bearish trend line with resistance at 1.3340 on the 4-hour chart.
• EUR/USD started a recovery wave above the 1.1220 level.
• USD/JPY is showing a few bearish signs below 146.20.

GBP/USD Technical Analysis

The British Pound remained support near 1.3250 against the US Dollar. GBP/USD formed a base and started a fresh increase above 1.3300.

Looking at the 4-hour chart, the pair surpassed a key bearish trend line with resistance at 1.3340. There was a close above the 1.3320 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour).

The pair even tested the 1.3400 zone. On the upside, the pair could face resistance near the 1.3400 level. The next key resistance sits near the 1.3420 level. The first major resistance sits at 1.3450.

A close above the 1.3450 level could set the pace for another increase. In the stated case, the pair could even clear the 1.3500 resistance. The next major stop for the bulls could be near the 1.3620 resistance.

On the downside, immediate support sits near the 1.3320 level. The next key support sits near 1.3300 and the 100 simple moving average (red, 4-hour). Any more losses could send the pair toward the 1.3250 pivot level in the near term. The mains support could be near 1.3200 and the 200 simple moving average (green, 4-hour).

Looking at EUR/USD, the pair managed to avoid more losses and started a recovery wave above the 1.1220 level.

Upcoming Economic Events:

• Fed's Bostic speech.
• Fed's Daly speech.
• Fed's Hammack speech.

DAX: ⬆️ Buy

• DAX reversed from the support level 23320.00
• Likely to rise to resistance level 24500.00

DAX index recently reversed from the key support level 23320.00 (former double top from March, as can be seen from the daily DAX chart below).

The upward reversal from the support level 23320.00 started the active minor impulse wave 5, which then broke above the minor resistance level 23925.00 (which stopped the previous impulse wave 3).

Given a clear daily uptrend, the DAX index can be expected to rise to the next resistance level 24500.00 (which is the target price for the completion of the active impulse wave (3)).

Natural Gas: ⬇️ Sell

• Natural Gas broke support zone
•  Likely to fall to support level 240.00

Natural Gas recently broke the support zone between the support level 3.600 (which stopped the previous wave B) and the 50% Fibonacci correction of the previous ABC correction (B) from April.

The breakout of this support zone accelerated the active impulse wave (C) of the primary correction 4 from the start of March.

Natural Gas can be expected to fall to the next support level 3.200, which is the target price for the completion of the active impulse wave (C).

On pace for its best six-monthly performance in over four years, 2025 has proven an interesting year for GBP/USD. In today’s session, GBP/USD trades higher on renewed trade policy optimism and a weaker dollar.

Key Takeaways

• Following the announcement of a major UK-EU trade deal this morning, GBP/USD trades +0.49% higher in today’s session, at around ~1.33468
• Recently, striking a first-of-its-kind trade agreement with the United States and a further deal with India, optimism about UK trade policy is boosting GBP/USD pricing, compounded by a general weakening of the US dollar

GBP/USD: UK-EU ‘reset’ deal dubbed the most significant since Brexit

Marketed as a ‘reset’ on relations, this morning’s announcement of a comprehensive UK-EU trade agreement has boosted sterling pricing and represents the third major trade deal the UK government has made in the last thirty days.

Spanning a range of crucial sectors, including fishing, energy, and agriculture, the agreement signifies a strengthening of UK-EU relations, which have been understandably shaky since the United Kingdom’s departure from the European Union in 2020.

As for GBP/USD pricing, the suggestion of further economic collaboration between the United Kingdom and the European Union has historically been positive for cable, with prices exceeding 1.34000 earlier today for the first time since May 6th.

Currency Power Balance tool, OANDA Global Markets,19/05/2024

GBP/USD: Cable gains amplified by dollar weakness

With the recent downgrade of the United States’ credit rating serving as a somewhat unfortunate welcome to the weekend, the fallout of Moody’s report Friday evening has undeniably been negative for the greenback.

Downgrading outlook from stable to negative, the credit-rating agency raised questions over escalating national debt, quoting “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.”

Having stayed silent on the downgrade, the report could perhaps have come at a better time for President Donald Trump, who hopes to seek further congressional approval for his “big, beautiful” tax cut bill this week.

With the perception of the US economy somewhat swayed by Moody’s latest report, we can expect GBP/USD to gain in the short term.

GBP/USD technical analysis

• Remaining in an uptrend since January, GBP/USD outlook remains bullish in the medium to short term. Should price break above ~1.33757, bulls will likely target previous highs of 1.34442
• When using the 14-period RSI on the daily timeframe, GBP/USD markets are building bullish momentum, breaking above the SMA for the first time since early April, suggesting a potential for further moves to the upside

A chart showing the recent price action of GBPUSD. OANDA, TradingView, 19/05/2024

New York Fed President John Williams noted that while the U.S. economy is currently performing well, rising uncertainty and shifting government policies warrant a patient approach on monetary policy.

He said monetary policy remains “slightly restrictive” and is “well positioned” to handle future developments.

“It’s going to take some time to get a clear view,” Williams said, emphasizing the Fed’s ability to “take our time” before making further moves.

Addressing concerns about the stability of Dollar assets, Williams acknowledged there are “rumors or concerns” stemming from recent fiscal and policy shifts. However, he downplayed immediate risks, noting that there have been no “major changes” in foreign inflows into the Treasury market.

Despite recent volatility in yields, he described bond markets as remaining “mostly range-bound.”.

BTCUSD accelerated lower on Monday, with 5K drop seen on quick pullback from sessions spike high to 107K zone.

Bitcoin reacted negatively to US rating downgrade and the price fell to the lower side of recent congestion (101K/107K) where it has been established after bulls faced strong headwinds on approach to new record high, but bids remained strong and limited dips.

Broader bullish bias is expected to remain while the price stays above psychological 100K level (reverted to solid support) and will keep in play hopes for renewed attacks at new all-time high and nearby psychological 110K barrier.

Daily studies remain bullish, despite violation of initial 10DMA support (103600) and contribute to expectations of prolonged consolidation (needs to hold above 100K) preceding fresh push higher.

Alternative scenario sees violation of 100K trigger as initial signal of deeper correction of 74389/107204 upleg.

Res: 105832; 107204; 109582; 110000
Sup: 101388; 100000; 99460; 97681

Markets

Moody’s depriving the US from its Aaa credit rating late on Friday to some extent was a symbolic step. It didn’t bring profound, new insights on the US budget deficit and its debt (un)sustainability. However, it comes at the time when Congress is processing President Trump’s ‘Big Beautiful Bill’ that might reinforce the trends of unfunded spending via prolonged tax cuts, higher interest rate payments and debt climbing to levels not seen since immediately after WWII. With the market focus turning away from the trade truce of earlier last week, the Moody’s action put debt sustainability again in the spotlights. US assets were hit the hardest as the sell-US trade resumed. US yields add between 1 bp (2-y) and 6 bps (30-y). The 10-y tests 4.55%. The 30-y at 5%+, is coming closer to the 5.17% multi-year top from end 2023. The turmoil on US debt sustainability doesn’t inspire the Fed to leave its wait-and-see modus. Fed Bostic indicated that he is leaning to only one Fed rate cut this year as he remains mostly worried on the Fed’s inflation mandate. Of course, the US is not the only major industrialized economy facing budgetary challenges. As was the case with the early April US bond sell-off, UK gilts in particular look vulnerable to spill-over effects with the 30-y also adding 5.5 bps (5.45%). The 5.65% April top, the highest level since mid-1998, is again looming on the horizon. Moves in Japanese yields are more modest, but the 30-y yield is holding within reach of the 3% multi-year top touched last week. German yields range between little changed (2-y) and +3bps (30-y at 3.06%), off the intraday highs. Interestingly, today’s move had only limited impact on intra-EMU spreads (Italy-Germany 10-y spread +2 bps at a still low 103 bps). In its spring forecasts, the EC downgraded its EMU 2025 & 2026 growth forecast. The disinflationary impact from trade tensions is seen outweighing other upward divers. The EC sees inflation reaching 2% mid this year and averaging 1.7% next year. This disinflationary message from the EC initially only had limited impact on the intraday moves, but EMU bonds rebounded later in the session. Higher credit risk premia block last week’s positive equity momentum with US indices underperforming (S&P 500 -1.0%, Nasdaq -1.4%, EuroStoxx 50 -0.7%). No white smoke is expected from the Trump-Putin call later today.

Dollar losses initially were modest this morning, but gained traction during the European trading. DXY dropped from the 100.9 area to 100.3. Contrary to last week, the euro this time slightly outperforms the yen. EUR/USD rebounded from the 1.119 area to currently change hands near the 1.126 area. USD/JPY eases to 145. EUR/GBP (0.842) is losing marginal ground against the single currency. A rather wide-ranging deal between the UK and the EU, includes not only a defense and security partnership, but also an agreement on fishery and food standards and other regulation. Both parties also engaged to work to a solution on student exchange programs. However, for now any potential positives for the UK/sterling are overshadowed by the overall risk-off.

News & Views

The European Commission (EC) downgraded its real GDP growth forecasts in today’s spring update. They are conditioned on the current general US tariff rate of 10% and the 25% on steel, aluminum and cars and assume no EU retaliatory measures. Nor do they take in account the higher spending for defense because plans weren’t detailed enough yet. Euro area GDP would expand by 0.9% this year and 1.4% in the next. The weaker growth reflects a tariff-related hit to European exports, which would grow just 0.7% vs. 2.2% anticipated in the November update. Private consumption is the main engine powering the economy, alongside a rebound (although a less pronounced one than in November) of capital investments. Inflation is expected to cool more rapidly on the combination of lower energy prices, intensifying (Chinese) competitive pressures and a stronger euro. This is only partially offset by higher inflation in food and services. Prices in general would rise 2.1% in 2025 and 1.7% in 2026. EC budget deficit forecasts were raised from -2.9% in 2025 to 3.2% an would deepen further marginally in 2026 to 3.3%.

EU leaders gave initial approval to the €150n loan plan to help fund a defense infrastructure on a European level, the Financial Times reported. The formal green light is expected for next week. The European Commission will raise the money on capital markets before distributing it to member states as loans. The money can be spent on products where at least 65% of the components’ value are from arms companies in the EU, Ukraine, Iceland Lichtenstein, Norway and Switzerland. Third countries’ arms companies can account for a maximum of 35% of the purchase, unless they sign a bilateral defense pact with the EU. The EU and UK have signed such a deal today.