08/06 – Quiet markets point to dollar selling

Jeremy Thomson-Cook
Jeremy Thomson-Cook 08 June 2021

GBP: Might move higher in the vacuum 

EUR: ECB on Thursday acting as the centre of gravity

USD: Low volatility not helping matters

Sterling

Sterling is not in the mood to do much at the moment. Data from the UK economy is thin on the ground until Friday and with the government likely to stay shtum on their final decisions on reopening parts of the UK economy until next Monday, the pound will likely sit at the behest of other currencies.

We are cautiously optimistic that in turn will lead to gains against a progressively weaker USD but have concerns that Wednesday’s ECB meeting in Frankfurt may generate some euro positivity, putting GBPEUR under some pressure.

Euro

It is that ECB meeting on Thursday which is garnering all the focus for the single currency. That being said a strong ZEW reading from Germany today could get EURUSD above the 1.22 mark and further signal that the single currency wants to move higher.

US dollar

Comments from former Fed Chair and current Treasury Secretary Janet Yellen that higher rates would be positive for the US economy failed to support the dollar yesterday suggesting that the market needs to hear it from those still sat within the central bank to take notice.

Ahead of Thursday’s inflation number which will likely be the most important data point for the USD this week, we expect the dollar’s weakening trend to be maintained. This should be especially true if we see a recovery in global risk sentiment after a couple of rocky days on global stock markets.

Volatility is also low making it a safer bet for investors to buy emerging market currencies and sell the USD to fund this play.

Elsewhere

We expect that the Japanese yen will continue its recent run of weakness in the coming sessions. GDP data from Japan overnight missed estimates but alongside a poor vaccination program, continual doubts over the prospects of the Olympics going ahead and low FX market volatility, the yen will likely remain in the crosshairs moving forward.

Market rates

Today’s interbank rates at 08.25 against sterling. Movement vs yesterday.

Euro €1.162 ↑
US dollar $1.412 ↓
Australian dollar $1.826 ↓
South African rand R19.00 ↓
Japanese yen ¥154.8 ↓

Have a great day everyone.