GBP: Fresh one month highs for GBP/USD
EUR: Single currency now joining the party
USD: Momentum is against the greenback
Sterling’s correlation with global equity markets and the amazing ability of investors to look through the chaos on the streets of the US have enabled the pound to hit a fresh one month high this morning against the USD whilst remaining perky against the EUR.
As we have noted, this could all come crashing down on Friday depending on the news from Brussels on the latest round of Brexit trade talks.
For today the fate of the pound is in the hands of the UK’s services sector that is expected to show further declines in output, and a deepening of the Covid-19 recession.
As we predicted yesterday, the euro is also starting to make gains against the US dollar and we think EURUSD has 1.14 in its sights given the broader move in other USD pairs but this may happen slowly.
As with the UK, focus will fall on locals services PMIs with releases from Italy, France, Germany and the wider Eurozone depicting just how weak retail, hospitality, tourism and other services activities remain.
Improving risk sentiment globally is driving the dollar lower again this morning with investors seemingly happy to pile into bets that some countries are emerging from the pandemic slowdown in short order.
Since the beginning of the pandemic bad news in the US and globally has been used as a reason to buy USD as a haven. As mentioned on Monday morning, day by day that trend seems to be shifting in favour of other currencies over the dollar with poor US news, hurting the USD.
Luckily enough we are going to see this change tested in the coming sessions with looks at the US’s services economy this afternoon before Friday’s payrolls numbers that will give a further update on the state of the US jobs market.
The AUD and NZD have continued to fly higher with the former having gained 25% since the lowest levels it hit in March. Once again, this is not a story of Australian or Kiwi fundamentals but a move in momentum away from the wider USD.
Have a great day and please stay safe.