Forex News
Danske Research Team notes that global equities advanced, with several markets near new all-time highs, in a volatile session dominated by macro data and Iran-related headlines. They highlight global cyclical outperformance, while in Europe defensives led and banks lagged despite higher rates, reflecting stagflation concerns after the flash PMIs. They also note that Asian markets are trading higher, led by Japan rather than the usual South Korea and Taiwan technology complex, as gains appear driven more by positive macro and reopening hopes than a classic tech rotation.
Cyclicals outperform while banks lag
"Equities moved higher yesterday, with several markets either close to or at new all-time highs. It was a volatile session where macro was clearly the most important story, but Iran headlines created the largest intraday swings and at times overshadowed the underlying macro message."
"Globally, cyclicals outperformed, but beneath the surface the rotation was highly interesting across regions, sectors and industries."
"In Europe, defensives led the market, and despite positive indices and higher rates, banks underperformed. That is a strong signal that the very stagflationary message coming out of the flash PMIs from Europe yesterday leads investors to worry that the ECB may be forced to hike rates for what equity investors would see as exactly the wrong reasons."
"This morning, Asian markets are higher. Worth noting is that Japan, rather than the usual South Korea and Taiwan tech complex, is leading the gains."
"The reason is that gains are driven by a positive macro and reopening hope trade more than a classic tech rotation. We see the same dynamic in European and US futures, which are also pointing higher, led by Europe ahead of the US, and again not led by tech."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- EUR/GBP flatlines around 0.8650 despite positive German data.
- The German economy grew at a steady 0.3% pace in Q1, according to GDP figures.
- UK Retail Sales contracted way beyond expectations in April
The Euro (EUR) languishes at 11-day lows against the British Pound (GBP) on Friday, on track for a 0.85% weekly loss. The positive German Gross Domestic Product (GDP) data has failed to support the common currency, while the Pound has been unfazed by weak Retail Sales numbers.
German GDP confirmed that the Eurozone’s leading economy grew at a 0.3% pace in the first three months of the year, unchanged from the previous quarter, while the yearly GDP was revised up to 0.4% from previous estimations of a 0.3% growth.
At the same time, NIQ revealed that the German GfK Consumer Confidence Survey for June picked up to -29.8, from an upwardly revised -33.1 in May. These are still negative levels, but closer to the figures seen before Iran’s war and, anyway, better than the -34 market consensus. The impact on the Euro, however, has been muted so far.
In the UK, data from National Statistics has shown that Retail Sales contracted at a 1.3% pace in April, more than twice the 0.6% decline expected by the market, following a 0.6% increase in March. Excluding fuel, sales of all other products dropped a more moderate 0.4%, but also beyond the 0.3% drop expected, following a 0.1% increase in March.
The Sterling, nevertheless, has managed to take back all the ground lost during the previous one, as market concerns about the country’s political stability seem to have ebbed. Apart from that, business activity showed further resilience in the UK than in the Eurozone on Thursday, which provided an additional boost to the GBP
Economic Indicator
Gross Domestic Product (QoQ)
The Gross Domestic Product released by the Statistisches Bundesamt Deutschland is a measure of the total value of all goods and services produced by Germany. The GDP is considered as a broad measure of the German economic activity and health. A high reading or a better than expected number has a positive effect on the EUR, while a falling trend is seen as negative (or bearish).
Read more.Last release: Fri May 22, 2026 06:00
Frequency: Quarterly
Actual: 0.3%
Consensus: 0.3%
Previous: 0.3%
Source: Federal Statistics Office of Germany
Economic Indicator
Retail Sales (MoM)
The Retail Sales data, released by the Office for National Statistics on a monthly basis, measures the volume of sales of goods by retailers in Great Britain directly to end customers. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the MoM reading comparing sales volumes in the reference month with the previous month. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Last release: Fri May 22, 2026 06:00
Frequency: Monthly
Actual: -1.3%
Consensus: -0.6%
Previous: 0.7%
Source: Office for National Statistics
- USD/TRY rises as the Turkish Lira falls following a top court ruling targeting the main opposition party.
- An Ankara appeals court annulled the CHP's 2023 leadership contest, effectively deposing opposition leader Özgür Özel.
- US Dollar gains as higher energy prices threaten to boost US inflation and prompt the Fed to keep rates elevated.
USD/TRY rises after a slight decline in the previous day, reaching a record high of 45.7778 during the Asian hours on Friday. The pair appreciates as the Turkish Lira (TRY) drops due to political uncertainty that emerges after a top court ruling targeting the main opposition party. Turkey’s top economic policymakers will meet on Friday morning to discuss measures to stem market turbulence.
An Ankara appeals court has dealt a fresh blow to Turkey's opposition by annulling the 2023 leadership contest of the main opposition Republican People’s Party (CHP). The ruling effectively deposes the party's current leader, Özgür Özel, marking a significant escalation in the judicial challenges facing political rivals of President Recep Tayyip Erdoğan.
Additionally, the USD/TRY pair appreciates as the US Dollar (USD) receives support from rising odds of hawkish sentiment surrounding the Federal Reserve (Fed) policy stance. Higher energy prices threaten to feed into core US consumer prices and inflation expectations, which could potentially push the Fed to keep interest rates higher. Furthermore, a stronger US economic growth outlook is adding weight to the case for monetary tightening and boosting the Greenback.
Fed officials remain cautious as they evaluate whether to adjust short-term interest rates. While they are currently holding the federal funds rate steady, policymakers are moving away from the idea of rate cuts and are increasingly open to raising rates if inflation fails to cool down.
US President Donald Trump will swear in Kevin Warsh as the chair of the US Federal Reserve on Friday at the White House. The new chair succeeds Jerome Powell, whose term expired on Friday but who has continued to serve on a pro-tempore basis until the transition.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- The US Dollar Index ticks up to near 99.25 despite increased hopes of a US-Iran deal.
- Iran still stresses holding uranium enrichment and control over the Strait of Hormuz.
- The Fed is unlikely to cut interest rates this year.
The US Dollar (USD) trades marginally higher during the early European trading session on Friday, even as market participants remain confident that the United States (US) and Iran will reach a deal soon.
As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, edges up to near 99.25.
On Thursday, the Iranian Labour News Agency (ILNA) stated that a final draft between the US and Iran has been reached with Pakistan's mediation, and a deal can be announced within the next few hours, Al Arabiya reported. The ILNA also stated that an immediate ceasefire on all fronts, guaranteed freedom of navigation in the Gulf and the Strait of Hormuz, and the launch of negotiations on outstanding issues within a week are key provisions of the agreement.
Meanwhile, senior Iranian officials have said that Iran’s uranium enrichment and Tehran’s control over the Strait of Hormuz remain among the sticking points, which US President Donald Trump has repeatedly called non-negotiable.
On the monetary policy front, traders remain confident that the Federal Reserve (Fed) will either hold interest rates steady at their current levels and deliver at least one interest rate hike this year.
US Dollar Index technical analysis
The Dollar Index Spot trades marginally higher at around 99.25 at the press time. The index holds above the 20-period Exponential Moving Average (EMA) at 98.79, keeping the near-term bias constructive as price extends its recovery from last month’s lows.
The Relative Strength Index (RSI) struggles to break above 60.00, suggesting the upside momentum remains muted.
On the downside, initial support is now seen at the 20-day EMA around 98.79, where a pullback could attract dip-buying interest if the broader bullish tone persists. The Dollar Index spot could slide to 98.00 if it fails to hold above the 20-day EMA. Looking down, the spot could extend the advance towards 100.00 if it manages to break above the May 21 high at 99.52.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann expect GBP/USD to continue trading sideways between 1.3400 and 1.3460 after a strong rise failed to extend. On a 1–3 week horizon, near‑term downward pressure is seen as having eased, with the Pound likely to range between 1.3330 and 1.3530. Longer term, a weekly close below 1.3300 could trigger a slide toward 1.2945/1.3010.
Pound-Dollar consolidates as pressure eases
"24-HOUR VIEW: Following the sharp rise in GBP to a high of 1.3463 two days ago, we highlighted yesterday that “despite the relatively strong rise, upward momentum has not increased significantly.” However, we were of the view that GBP “could retest the 1.3465 level before levelling off.” GBP did not retest 1.3465, as it traded sideways between 1.3394 and 1.3455 before closing largely unchanged at 1.3430 (-0.03%). Further sideways trading appears likely today, probably between 1.3400 and 1.3460."
"1-3 WEEKS VIEW: Our update from Tuesday (19 May, spot at 1.3435) remains valid. As highlighted, the recent “downward pressure has eased,” and GBP “is likely to range-trade between 1.3330 and 1.3530 for now.” "
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Commerzbank’s Volkmar Baur notes that EUR/USD has fallen to around 1.16 as markets now price a higher probability of a Fed rate hike by year-end while expecting the European Central Bank (ECB) to react less to inflation. Diverging PMI data show the Eurozone economy is hit harder by higher Oil and gas prices than the US, leaving EUR/USD sensitive to developments in the Iran conflict.
Diverging Fed and ECB reactions on Oil
"After all, the oil price is only a few bucks higher, and EUR/USD sits significantly lower at 1.16."
"The market therefore assumes that the ECB will not react as strongly to rising inflation as it did two weeks ago. And overall, this explains the lower EUR-USD rate."
"The eurozone economy is being hit much harder by higher oil and gas prices than the US economy. And this limits the ECB’s room to maneuver in responding to higher inflation more than the US economy limits the Fed."
"Looking ahead, this underscores once again how important the further course of the Iran conflict remains for EUR/USD. A swift resolution would certainly support the euro, as the market would likely price in Fed rate cuts again and the movement in rate expectations would probably be greater in the US than in the eurozone."
"Conversely, recent developments suggest that if the conflict persists, the euro is likely to lose ground against the US dollar over time as it becomes clearer that the economic impact in Europe is more severe than in the US."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- GBP/USD softens to around 1.3420 in Friday's early European session.
- UK Retail Sales fell 1.3% MoM in April, softer than expected.
- Trump will host a swearing-in ceremony for new Fed Chair Kevin Warsh.
The GBP/USD pair declines to near 1.3420 during the early European trading hours on Friday. The British Pound (GBP) remains weak against the US Dollar (USD) following the worse-than-expected UK economic data. Traders will keep an eye on the Michigan Consumer Sentiment Index report, which will be released later on Friday.
Data released by the Office for National Statistics (ONS) on Friday showed that UK Retail Sales fell 1.3% month-over-month (MoM) in April, compared to a revised 0.6% in March. This figure came in softer than the market expectations of a 0.6% decline.
Additionally, the core Retail Sales, stripping the auto motor fuel sales, dropped by 0.4% MoM in April, versus an increase of 0.1% prior (revised from 0.2%) and the estimated -0.3% figure. On an annual basis, Retail Sales in the UK arrived at 0% in April, versus a rise of 1.4% prior (revised from 1.7%) and 1.3% expectations.
The Cable edges slightly lower in an immediate reaction to the softer UK inflation report. This report, combined with an unexpected rise in the Unemployment Rate to 5.0%, prompted traders to scale back expectations for future Bank of England (BoE) rate hikes by December.
On the USD’s front, US President Donald Trump will swear in Kevin Warsh, his hand-picked choice to lead the Fed, during a ceremony on Friday, per Reuters. The new Fed Chair will succeed Jerome Powell, whose term expired Friday but who continues to serve on a pro-tempore basis until Warsh officially takes over.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Retail Sales, a key measure of consumer spending, in the United Kingdom (UK) fell 1.3% month-over-month (MoM) in April after rising by a revised 0.6% in March, the latest data published by the Office for National Statistics (ONS) showed on Friday.
The market forecast was for a 0.6% decline in the reported month.
The core Retail Sales, stripping the auto motor fuel sales, decreased by 0.4% MoM in April, compared with the previous increase of 0.1% (revised from 0.2%) and the estimated -0.3% figure.
The annual Retail Sales in the UK came in at 0% in April versus a rise of 1.4% prior (revised from 1.7%) and 1.3% expectations.
The annual core Retail Sales rose 1.1% in the same month, against March’s 1.5% (revised from 1.7%). The reading came in below the consensus of 1.5%.
Market reaction to the UK Retail Sales report
The British Pound edges slightly lower in an initial reaction to the softer UK Retail Sales data. The GBP/USD pair is trading 0.05% lower on the day at 1.3423, as of writing.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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