Explore the latest FX market update as the US Dollar posts its strongest week since March, GBP weakens amid UK political uncertainty, and investors react to Fed expectations, oil prices, and global risk sentiment.
Key Highlight
- The US Dollar continued its strong momentum for a fourth straight session and is now heading for its strongest weekly performance since late March.
- Stronger-than-expected US inflation and consumer data has reduced expectations for near-term Federal Reserve rate cuts, helping support the USD.
- Sterling came under pressure as renewed UK political uncertainty unsettled markets, with growing speculation around a potential Labour leadership challenge.
- Oil prices moved higher after comments from Donald Trump regarding the Strait of Hormuz, adding further support to the dollar and broader safe-haven demand.
- Markets are closely watching the Trump-Xi summit outcome, which could heavily influence global risk appetite heading into next week.
Market Recap
The US Dollar remained firmly in demand throughout Thursday and into Friday trading, extending a four-day rally. Investor sentiment continues to favour the greenback after a series of strong US economic releases this week, including elevated CPI and PPI inflation data, alongside resilient retail sales and labour market figures. These releases have reinforced expectations that the Federal Reserve may keep interest rates higher for longer.
Additional support for the dollar came from rising oil prices after Donald Trump suggested the US would not require the Strait of Hormuz to remain open. Brent crude climbed sharply, increasing demand for safe-haven assets and further underpinning USD strength.
Sterling was one of the weaker major currencies overnight as political developments in the UK weighed on confidence. Health Secretary Wes Streeting resigned from cabinet, while Manchester Mayor Andy Burnham confirmed intentions to enter Parliament, fuelling speculation over a potential future leadership contest within Labour. Markets are becoming increasingly concerned that a shift in leadership could lead to a looser fiscal approach, which may place additional pressure on the pound.
Comments from Angela Rayner suggesting she may also enter a future leadership race added to the uncertainty, while Chancellor Rachel Reeves attempted to reassure markets by calling for stability. Investors currently view figures such as Burnham, Rayner and Miliband as less supportive for GBP, whereas Starmer and Reeves are generally considered more market-friendly options.
Market Update
Heading into the weekend, political uncertainty in the UK is likely to remain a key driver for GBP volatility alongside the broader strength of the US Dollar. Any escalation in speculation surrounding Labour leadership changes could trigger sharper market reactions, particularly during periods of thinner liquidity.
Attention will also remain firmly on developments from the Trump-Xi summit. A constructive outcome could improve global risk sentiment and support currencies such as the Australian and New Zealand Dollars. However, any deterioration in US-China relations would likely increase demand for traditional safe havens including the USD, Swiss Franc and Japanese Yen.
The dollar enters Friday with strong momentum behind it, although with limited major US data releases ahead, markets may become increasingly sensitive to geopolitical headlines and energy price movements.
Meanwhile, the Japanese Yen remains one to watch after Bank of Japan board member Hajime Masu signalled support for further rate hikes “at the earliest opportunity.” Despite the hawkish rhetoric, the Yen has struggled to gain traction so far as broader USD demand continues to dominate currency markets.
15th May 2026
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