GBP: Sterling unable to capitalise on BOE optimism
EUR: Lagarde speaks at noon
USD: Jobs numbers due at 13.30 BST
The majority of the movement in GBPUSD is dollar weakness but sterling is also flexing its muscles with the Bank of England and local election event risk done and dusted with little cause for concern. The Bank remains cautious as we outlined on Friday and the vote north of the border saw the SNP win Holyrood yet again but without a majority and therefore a wafer-thin mandate for another referendum on Scottish independence.
This week therefore could be quite positive for sterling with Wednesday’s GDP figure the likely guiding light for pound gains. 1.5% may not sound like much for the past year but given the level of concerns there were around transition into Brexit and the Covid-19 restrictions, that number feels like a win.
Friday’s news that over two thirds of adults in the UK have had at least one Covid-19 jab will also be supporting sterling.
The euro is also gaining against the USD this morning albeit to a lesser extent than the pound. Given the elevated risk environment we suspect investors will be looking for currencies with yield, something the euro does not have. Clearly however, the situation on the ground in Europe for both vaccine coverage and economic growth are improving and therefore the euro should remain supported moving forward.
Dollar weakness is the order of the day as we open this week, following a poor jobs report on Friday that saw a quarter of the expected jobs added to the US economy. Unemployment rose and wages increased which suggests that the US economy has a lot of digesting to do for people rejoining the job search to actually find paid employment.
This dollar move is markets repricing expectations for a Federal Reserve hike in interest rates or reduction of stimulus and although it looks like the dollar has further to weaken, this was only one data point; analysts will be expecting a catch-up next month and that could trigger further USD volatility as we move through the summer months.
In the meantime, if global risk sentiment continues to improve then this USD weakness is far from over.
The improvements in risk sentiment, driven by continued stimulus by central banks is weighing on the yen this morning. GBPJPY could trade to 155.00 soon.
Today’s interbank rates at 08:49 against sterling. Movement vs yesterday.
|US dollar||$1.407 ↑|
|Australian dollar||$1.791 ↑|
|South African rand||R19.92 ↑|
|Japanese yen||¥153.2 ↑|
Have a great day.