Moneycorp Currency Insights: May 2026 - What’s Happening and What It Means

14 May 2026

By Edward Ward, Senior Partnerships Manager, Moneycorp

April highlighted just how sensitive currency markets remain to geopolitics, energy prices, and central bank guidance. The main driver has been the ongoing US–Iran conflict, particularly the risk of disruption to the Strait of Hormuz, a critical route for global oil supplies.

Early optimism that a short ceasefire could lead to wider negotiations faded as talks broke down. As a result, markets refocused on the risk of prolonged disruption to energy supplies, keeping volatility elevated across FX markets. Towards the end of April, the Federal Reserve, European Central Bank and Bank of England all left interest rates unchanged. Despite this pause, their messages were cautious:

• Energy prices are increasing inflation risks
• Near‑term rate cuts now look less likely
• Policy decisions will remain data dependent

The Fed stood out with an unusually divided vote, highlighting uncertainty over the outlook. Both the ECB and BoE made it clear that if energy‑driven inflation persists, they may need to keep policy tighter for longer.

What This Means:

GBP/USD

• Sterling has been relatively resilient, reaching its highest level since mid‑February against the dollar.
• For UK clients buying USD, recent levels have been more favourable.
• For those selling USD back to GBP, current strength may be an opportunity to consider securing rates before further volatility.

GBP/EUR

• GBP also reached its strongest level since mid‑March against the euro.
• UK businesses buying euros have benefited from this recent move.
• However, with energy risks and ECB caution still in play, these levels may not last.

EUR/USD

• With both the Fed and ECB sounding cautious, EUR/USD has remained sensitive to energy prices and geopolitical headlines.
• Buyers and sellers should be prepared for sharp moves if inflation data or central bank language shifts.

Looking Ahead: Key Drivers in May

Markets are likely to remain highly reactive as investors continue to navigate a complex mix of geopolitical, economic and political risks. Ongoing developments in the US Iran situation and the potential impact on global energy prices remain a key source of volatility, particularly for USD and GBP pairs. Upcoming inflation releases and central bank commentary will be closely watched for any signals on the future path of interest rates, which could quickly shift expectations and currency pricing. Closer to home, political developments including the UK local and regional elections may also influence sterling sentiment in the near term, adding to short‑term uncertainty for those with upcoming currency requirements.