Welcome to the weekly market update from IFX Payments.
Things are looking moody for the US but brighter for the UK and Europe in this week’s report, as deals are struck and ratings cut. Read on to find out more.
Current rates
| Currency pair | Rate |
|---|---|
| eur usd | 1.3358 |
| gbp eur | 1.1877 |
| gbp usd | 1.1249 |
Rates correct as of 09:30am in Monday 19th May but may now have changed.
The Big 3
Three stories covering the latest developments in economies, currencies and borders.
US ratings downgrade slams breaks on market recovery
Moody's Ratings downgraded the US government's credit rating from Aaa to Aa1, citing concerns over the country's ballooning budget deficit. Treasury yields jumped to 5% whilst futures for the likes of Dow Jones and S&P 500 slid.
The increase in debt over a decade and further threats of continued trade wars from the US treasury have eroded any newfound confidence gained from de-escalation with China and the GB trade deal. The underlying message for investors is still diversification away from America.
[MSN]
UK and EU reach deal to strengthen relationship
Negotiators for the European Union and the UK have reached a deal to strengthen their post-Brexit relationship, which includes a 12-year agreement for fishing access in UK waters. This should unlock future agreements on food and agricultural standards and there will be a joint commitment to defence and security. Other elements such as border crossings, youth visas, and student exchange are subject to further negotiation at the time of publication.
[BBC]
EUR/USD on a knife edge and pulled in two directions
Forecasts for the short and long-term valuation of the Euro seem to vary across the market. The EUR/USD pair regained 1.1200 in European trading on Monday, following US dollar selling. From European banks, Nordea suggest it could strengthen to 1.20 by the end of 2026 whereas ING suggest it will stay put at 1.13 by the end of 2025.
Against the USD, the impact of tariffs, fiscal scrutiny from Moody's and subsequent Treasury note yields will pour significant downward pressure on the USD - BUT there are equally lower ECB rates and headwinds to contend with on the EUR side.
Recap
UK economy is faring better than expected
Figures from last week show the UK economy grew by more than expected in the first three months of 2025, becoming the fastest growing nation in the G7. It's a welcome boost to the Labour administration but experts have warned they could be artificially inflated by firms boosting production in a bid to dodge the US president’s tariffs, that came soon after the recorded growth. Nonetheless, analysts are pleasantly surprised. The fact is, for that quarter it was a return to a healthy growing economy.
Looking forward
More tariff discussions and settlement are likely to take place this week.
Russian GDP also in the spotlight.
Tuesday: Australian interest rate decision, Canada CPI reporting, G7 finance ministers and central bank heads to meet in Canada.
Wednesday: UK inflation data due.
Friday: Germany reports GDP and Japan reports CPI. US home sales report.
Here's what we're talking to our clients about
We’re always here to support. Here’s what we’re talking to clients about right now:
- US dollar risk in these mercurial conditions.
- Changes to fiscal fortunes from Reeves’ budget on businesses.
- What the EURUSD might do now.
The contents of this article do not constitute financial advice and are provided for general information purposes only.
