Pound Falls, Euro Dips: May 22, 2025

Moneta Markets Daily Market Update - Pound Falls, Euro Dips: May 22, 2025

Global financial markets on May 22, 2025, are shaped by persistent US fiscal concerns, mixed economic data, and geopolitical uncertainties. Hot UK inflation (3.5% YoY) lifts GBP/USD near a three-year high, while weak Eurozone PMI data (Composite 49.5) pressures EUR/USD and EUR/JPY. The US Dollar (DXY at 99.70) stabilizes after a three-day slide, with US PMI and G7 trade headlines in focus. WTI crude holds above $62.50 amid Middle East tensions, and silver remains steady at $33.37. Fed caution and BoJ hawkishness drive currency dynamics.

EUR/GBP Rises Post-UK Inflation Surprise

Current Level: EUR/GBP trades near 0.8450, up after UK CPI data.

Market Dynamics: UK CPI (3.5% YoY vs. 3.3% expected) and Services CPI (5.4% vs. 4.8%) signal persistent inflation, reducing BoE rate-cut bets for 2025, per Danske Bank. This pressures GBP, lifting EUR/GBP despite weak Eurozone PMI (Composite 49.5). ECB’s June rate-cut odds (90%) cap EUR gains. US fiscal worries (Trump’s $3.8T tax bill) weaken USD, indirectly supporting EUR. G7 talks and ECB speeches (Cipollone, Knot) are key.

Technical Outlook: Resistance at 0.8500; support at 0.8400. RSI near 50 suggests consolidation, with UK data driving sentiment.

 EUR/USD Dips to 1.1310

Current Level: EUR/USD trades near 1.1310, down 0.2%.

Market Dynamics: Weak Eurozone PMI (Services 48.9, Composite 49.5) signals contraction, pressuring EUR, per FXStreet. USD stabilizes (DXY at 99.70) post-Moody’s downgrade, with US PMI (13:45 GMT) expected to show steady growth. UOB Group notes EUR/USD’s upward bias above the 55-day EMA (1.1050), but a retest of 1.1573 is premature. Russia-Ukraine ceasefire doubts (Trump’s warning) and ECB rate-cut signals (Centeno’s 1.5-2% target) weigh on EUR.

Technical Outlook: Resistance at 1.1425; support at 1.1200. RSI at 57.45 supports bullish bias, with US PMI critical.

 GBP/USD Falls to 1.3410

Current Level: GBP/USD trades near 1.3410, off its 3-year high of 1.3468.

Key Drivers: Mixed UK PMI (Manufacturing 45.1, Services 50.2) tempers GBP gains post-CPI (3.5% YoY), per FXStreet. USD strengthens slightly as House approves Trump’s tax bill ($3.8T debt increase), raising deficit fears. BoE’s cautious outlook (stagflation risks) supports GBP, but US PMI and Fed comments (Dimon’s stagflation warning) drive USD. G7 trade talks may add volatility.

Technical Outlook: Resistance at 1.3468; support at 1.3300. RSI above 60 maintains bullish momentum, with US data key.

 EUR/JPY Holds Near 162.00

Current Level: EUR/JPY trades near 162.00, down 0.5%.

Key Drivers: Weak Eurozone PMI (Composite 49.5) pressures EUR, but JPY’s safe-haven demand rises amid US fiscal concerns (Moody’s downgrade) and Middle East tensions, per FXStreet. BoJ’s rate-hike bets (Uchida’s hawkish stance) bolster JPY, with US-Japan trade talks looming. Russia-Ukraine ceasefire uncertainty adds JPY support. ECB’s dovish signals cap EUR upside.

Technical Outlook: Support at 162.00; resistance at 163.00. Bearish RSI below 50 favors downside, with trade talks pivotal.

 WTI Crude Steady Above $62.50

Current Level: WTI crude trades near $62.60, slightly down.

Market Dynamics: Israel-Iran nuclear strike fears sustain oil prices, despite API’s +2.49M barrel build. EIA inventory data (today) will influence direction. Kazakhstan’s output rise (+2%) pressures OPEC+ quotas, while US-China chip tensions add volatility. Fed’s cautious stance (Dimon’s warning) and G7 trade headlines impact USD, affecting oil.

Technical Outlook: Resistance at $63.50; support at $61.50. RSI above 60 suggests bullish bias, with EIA data crucial.

 Silver Unchanged at $33.37

Current Level: Silver (XAG/USD) trades at $33.37, flat.

Market Dynamics: Silver holds steady as safe-haven demand from Middle East tensions balances US fiscal concerns, per FXStreet. Gold/silver ratio (99.31) reflects gold’s outperformance ($3,300). Fed rate-cut bets (two cuts in 2025) and USD weakness support silver, but Eurozone PMI weakness caps gains. US PMI and G7 outcomes are focal points.

Technical Outlook: Resistance at $33.50; support at $32.00. RSI near 50 indicates neutrality, with US data driving sentiment.

 Economic Data and Policy Focus

Today’s Data: US S&P Global PMI (13:45 GMT) is expected to show steady expansion, supporting USD. Eurozone PMI (Composite 49.5, Services 48.9) signals contraction, pressuring EUR. UK PMI (Manufacturing 45.1, Services 50.2) reflects mixed growth, with CPI (3.5% YoY) reducing BoE rate-cut bets. ECB speeches and G7 trade talks (Canada) are key.

Geopolitical Developments: Israel-Iran risks, Gaza escalations, and Russia-Ukraine ceasefire doubts (Trump’s shift) boost safe-haven JPY and gold. US-China chip tensions (Huawei ban) strain trade truce, impacting markets.

US Fiscal Concerns: Trump’s tax bill ($3.8T debt increase) and Moody’s downgrade (Aa1) raise deficit fears, pressuring USD and Treasuries, per ING. Fed’s cautious stance (Dimon’s stagflation warning) adds uncertainty.

US-China Trade Deal and Geopolitical Risks

Trade Status: US-China 90-day tariff truce (US: 30%, China: 10%) faces strain from US chip restrictions (Huawei), with China accusing the US of bullying. US-Japan trade talks and G7 FX discussions (Bessent’s absence) add volatility. ECB’s Nagel sees progress in EU-US talks.Geopolitical Tensions: Israel-Iran nuclear risks, Gaza operations, and Russia-Ukraine truce doubts drive JPY, gold, and oil, per WSJ.

Outlook

On May 22, 2025, UK CPI lifts EUR/GBP (0.8450) and GBP/USD (1.3410), while weak Eurozone PMI pressures EUR/USD (1.1310) and EUR/JPY (162.00). WTI ($62.60) holds firm on Middle East risks, and silver ($33.37) stays flat. US PMI, G7 trade headlines, and Fed speeches will drive volatility, with US fiscal concerns and geopolitical tensions in focus.

Stay tuned for further updates.