As of May 22, the latest economic data reveals a growing contrast between the United States, which is beginning to show signs of weakness, and Europe and the UK, which are showing early signs of recovery. This divergence is having a direct impact on the movement of major currencies such as the US Dollar (USD), Euro (EUR), and British Pound (GBP).
United States: Weak Signals from Labor and Manufacturing Data
US jobless claims edged up slightly to 230,000, indicating potential softening in the labor market. Manufacturing PMI fell to 49.9 (signaling contraction), while the services sector posted modest expansion at 51.0. On the other hand, existing home sales rose to 4.15 million units, indicating that consumer demand remains solid. Overall, this data has dampened expectations of further Fed rate hikes and has put mild downward pressure on the USD.
Eurozone: Signs of Recovery Strengthening
Manufacturing and services PMIs in France and Germany showed improvement, although some figures remain in contraction territory. The Eurozone services PMI rose to 50.4—returning to expansion territory. Germany’s Ifo Business Climate Index also climbed to 87.4, reflecting increased business optimism. This combination of data has helped the Euro strengthen against both the USD and the Pound.
United Kingdom: Services Sector Lifts the Pound
UK services PMI rose to 50.0, indicating expansion, while the manufacturing sector remained in contraction at 46.2—though slightly improved. This has provided moderate support for the Pound, particularly as the services sector plays a dominant role in the UK economy.
Currency Market Impact
- EUR/USD: Trending bullish, supported by improving Eurozone data.
- GBP/USD: Moderate strength due to recovery in the services sector.
- EUR/GBP: Pointing to a stronger Euro against the Pound.
Conclusion
As the US economy begins to show signs of slowing, the Eurozone and the UK appear to be in the early stages of recovery. This trend is shifting the balance of power in global currencies and could influence the direction of future monetary policy decisions.
