![\"\"](\"\/wp-content\/uploads\/2023\/05\/image-132.png\")
<\/figure>\n\n\n\nGBP \u2013 BoE admits failures regarding inflation predictions<\/h2>\n\n\n\n
The pound is about to end the week higher against the Yen, yet lower than the dollar and the euro. On a fundamental note, we note the continued reduction in confidence by investors in the London stock exchange as UK regulators forced Meta (#FB) to sell the image platform Giphy to Shutterstock, citing competition concerns. On a monetary level, we highlight BoE Governor Bailey\u2019s statements on Wednesday, who acknowledged that there are \u201cvery big lessons to learn\u201d, referring to the bank\u2019s failure to properly forecast inflationary pressures. Furthermore, MPC member Hugh Pill re-iterated comments made by Governor Bailey, stating that \u201cWe are trying to understand why we have made errors in inflation forecasts\u201d, startling investors who could now question whether or not the bank\u2019s revision of the UK\u2019s GDP growth rate is accurate. On a macroeconomic level, we note the CPI rate for April which actually ticked up, on a month-of-month level whilst the year-on-year slowed down yet not as much as the market expected. Market expectations are for BoE to proceed with more rate hikes which could provide some support to the pound on a monetary level. On a macroeconomic level, UK\u2019s Preliminary PMI figures decreased with the Manufacturing industry experiencing a worsening contraction of economic activity. Furthermore, we highlight the release of UK\u2019s Retail sales growth rate for April which accelerated on a MoM basis beyond market expectations implying that the demand side of the UK economy may continue to fuel inflationary pressures.<\/p>\n\n\n\n The JPY is about to end the week in the reds against the common currency the pound and the greenback in a sign of a wider weakening. Fundamentally, the JPY has been experiencing safe haven outflows since progress has been made on raising the US debt ceiling, yet we highlight the fact that until a deal is reached, the yen could receive safe haven inflows should a no-deal scenario be materialized until the 1st of June. On a monetary level, we note BoJ Governor Ueda who stated last Friday that \u201cThe cost of prematurely shifting policy, and nipping the bud towards achieving 2% inflation, is extremely large\u201d, reducing expectations of an upheaval of his predecessor\u2019s YCC policy. However, the Governor stated yesterday that should Japan\u2019s CPI fail to slow down in line with projections, the bank will act swiftly, a rather unusual statement from a BoJ Governor, which could, in turn, spark some support for JPY. On a macro level, we note the release of Japan\u2019s Tokyo CPI rates that were released during today\u2019s Asian session, which were indicative of reduced inflationary pressures, as they slowed down beyond market expectations.<\/p>\n\n\n\n The common currency weakened against the dollar but not the pound and the Yen. Fundamentally, we note a number of strikes in the transportation industry, with airline unions announcing a 24-hour ground handling strike at airports on the 4th of June and a 24-hour Nationwide bus, train and tram strike today. The major disruptions despite being temporary, could have long-lasting economic implications should they be prolonged during the peak tourism season in Europe. On a monetary front, we highlight the numerous ECB policymakers such as ECB President Lagarde, Vice President De Guindos, ECB\u2019s Nagel and ECB Villeroy De Galhau who all re-iterated the need for further rate hikes in order to combat inflation. Despite the continued hawkish rhetoric from policymakers, the euro appears to have failed to make significant gains as market analysts had already taken future rate hikes into account. On a macroeconomic level, Germany\u2019s GDP rate for Q1, ticked downwards and effectively placed the German economy in a recession. With Europe\u2019s largest economy in a technical recession, pressure on ECB policymakers may be mounting to ease on the aggressive rate hiking path. Should France\u2019s GDP rates for Q1 which are due next week also decline more than what is anticipated then we may see heightened market volatility, given that the two largest economies in Europe are slowing down and could have a negative impact on the euro. Interestingly Europe\u2019s preliminary HICP rate for May is due out next Thursday, where should it tick upwards we may see the political forces battle within the ECB, whose core mandate is to reduce inflation.<\/p>\n\n\n\n The Aussie appears to have significantly weakened against the USD as the week draws to a close. On a fundamental note, we highlight the meeting between Indian President Modi and Australian Prime Minister Albanese, where the two leaders agreed on a new hydrogen task force, meant to promote cooperation on gas production without the need for fossil fuels. Furthermore, the two leaders noted that the free-trade deal negotiations are expected to be finalized before the end of the year, reducing Australia\u2019s dependence on China. On a monetary note, we note no major announcements by RBA yet the bank\u2019s Governor, Phillip Lowe is scheduled to speak on Tuesday, as we near the next RBA interest rate decision on the 6th of June. On a macroeconomic level, we note that Australia\u2019s Preliminary Manufacturing figure was better than expected, yet failed to provide long-term support for the Aussie as the greenback\u2019s dominance was evident throughout the week. On the contrary, Australia\u2019s Preliminary Retail sales for April, slowed down more than expected, reaching stagnation levels and hinting towards the adverse effects of RBAs\u2019 monetary policy tightening on the demand side of the Australian economy. Lastly, traders may set their sights on China\u2019s NBS and Caixin Manufacturing PMI figures next week which are anticipated to increase, thus as China being the largest importer of Australian goods, we may see the Aussie strengthening should the actual figures meet their respective forecasts, as the data could indicate the potential for increased demand of Australian goods.<\/p>\n\n\n\n The Loonie appears to have lost ground against the dollar for the week. Fundamentally we note that the wildfires in the Alberta region, appear to have subsided and eased concerns for the region\u2019s oil and gas outputs. Furthermore, we note that Toronto Dominion, one of Canada\u2019s largest banks, announced a plan to buy back its shares following the failed acquisition of First Horizon, thus increasing consumer confidence in the country\u2019s banking sector. On a monetary tone, we note the lack of press releases by the BoC, which may have contributed to the CAD\u2019s losses. On a macroeconomic level, we note that despite the reduction in the Preliminary Manufacturing sales, it appears that traders were unphased and continued to support the Loonie, as traders eagerly await the release of Canada\u2019s Preliminary Wholesale Sales rate which is due out during today\u2019s American session. Lastly, we note that market attention is expected to shift to next week\u2019s GDP rate for Q1, where should the GDP rate come in higher than expected, it could facilitate Loonie\u2019s rise, whereas a lower-than-expected figure could weaken the CAD. We should note that oil\u2019s price seems about to end the week relatively unchanged and may on a fundamental level provide some support for the CAD should its price start rising in the coming week as well, as Canada is a major oil-producing economy.<\/p>\n\n\n\n As a general comment we expect, that the high impact of the financial releases on combination with the continued US debt ceiling drama, to keep traders on high alert as we near the \u2018X-Date\u2019 which has been indicated to be as soon as June 1st by some analysts. Also given that the majority of companies have already released their financial earnings for Q1 we have a relatively quiet earnings week with no major releases expected. On a fundamental level, US stock market participants have lost ground this week due to the debt ceiling fears, yet the outlier appears to be the NASDAQ which has been propelled upwards as a result of NVIDIA\u2019s earnings report which beat market expectations, with the firm nearing a $1 trillion market cap. We tend to maintain some worries for the market\u2019s AI enthusiasm, as it may turn out to be the next dot com bubble. We do not reject AI as such but still view the market\u2019s excitement as too high at the current stage which may allow for a number of companies to enter US stock markets without substantial background and prospects. Furthermore, gold\u2019s price seems about to end lower for a 3rd week in a row. The shiny metal may have seen safe haven outflows as debt ceiling talks have slightly progressed, in addition to a strengthening dollar, have alleviated downward pressures on the gold bullion thus straying further away from the $2000 key psychological barrier.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/05\/image-133.png\")
<\/figure>\n\n\n\nJPY \u2013 JPY continues facing safe haven outflows once again<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/05\/image-134.png\")
<\/figure>\n\n\n\nEUR \u2013 Will France\u2019s GDP rates next week, simulate those of Germany?<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/05\/image-135.png\")
<\/figure>\n\n\n\nAUD \u2013 Australia gradually seeks to reduce its dependence on China<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/05\/image-136.png\")
<\/figure>\n\n\n\nCAD \u2013 Alberta wildfires appear to be under control<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/05\/image-137.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n