In the second half of the month it was the US dollar that gained the upper hand. After two months in the wilderness the Greenback rediscovered the support that it had lost in mid-March. In May the dollar went up by two and a half cents against the euro, just over 2%, and added up to three times that much against the commodity-oriented Australian, Canadian and New Zealand dollars. Behind the US dollar’s recovery was a renewed belief that the Federal Reserve will begin to crank up interest rates before the end of the year.

In April and early May the US economic statistics had gone off the boil while the picture in Euroland was improving, as May moved on that changed. There had been questions about America’s weak growth during the first quarter (it eventually transpired that gross domestic product shrank slightly) but the situation was improving once again. Meanwhile in the euro zone there was re-emerging concern that Athens and the EC/ECB/IMF “troika” really might not be able to forge an agreement that would keep Greece in the euro.

In June, Greece is due to make about €1.5 billion of repayments to the IMF. It must find the first €300 million by the end of this week. The economy minister says it will make the payment but economists elsewhere are almost united in their assessment that it will not have the cash to do so. No one is sure what would happen if the money were to not arrive, but there is a general consensus that it wouldn’t be good news for the euro. Since the beginning of May the euro has fallen by two and a half cents against sterling.

May’s biggest casualty was the New Zealand dollar, which lost 13 cents, a fall of -6.5%. It got off to a bad start when the NZ employment data fell well short of investors’ expectations and it did not finish well either, as a result of deteriorating business confidence and slowing new home sales.

The Kiwi and the Aussie were both affected by the newfound optimism surrounding rising US interest rates. Investors are concerned that higher dollar rates will dampen activity in emerging economies, further eroding demand for their exports. The Australian dollar lost two and a half US cents and went down by five and a half cents against sterling.

Friday’s Greek debt repayment could be the defining moment of June but don’t bank on it: If the IMF wanted to defuse the situation it could defer all the month’s payments to the 30th, thus giving the battered can yet another kick down the road.

There was a breakthrough for sterling on May 7 when the general election unexpectedly delivered a majority UK government. It marked a turning point for the pound, which rallied by an average of 2% over the next couple of days. Since the beginning of May sterling has strengthened on almost every front, losing out only to the US dollar where it is down by half cent.

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