Bearish Outlook
GBP: 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.
EUR: 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.
USD: 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.
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