Following the surge in April’s US consumer prices (+4.2%), US indices saw a dramatic correction. The Dow Jones index witnessed its sharpest fall since January, now down over 3% from the record highs seen this week. The threat of higher interest rates in the US sooner than anticipated, saw the US Dollar firmer across the board. As a result, the Pound dropped and closed below £/$ 1.4100 with the Euro closing below major technical support of €/$ 1.2100. Middle East tensions also contributed to Dollar strength.

With exception to the US Dollar, Sterling’s gains have held on the week across the board supported by above consensus industrial & manufacturing data for the UK in April as we near the easing of lockdown. Against the Euro, technical support is expected at €1.1600 whereas against the firmer Dollar, support is not seen until $1.3900.

The Euro lost ground yesterday against both the Dollar and Sterling. The combination of higher US inflation and weaker than expected Eurozone industrial production did little to help the Euro’s cause.

Opening Interbank levels:
GBP/USD 1.4060
GBP/EUR 1.1640
EUR/USD 1.2085