GBPEUR falls to 3 month low

GBP: Slumps as Leicester restarts lockdown
EUR: A favourite in H2
USD: Powell testimony to highlight distance to travel

Sterling

Sterling closed out the 2nd quarter well against the USD, rallying into the close in a move that also saw GBPEUR back above the 1.10 mark.

Those of you who attended our webinar yesterday that focused on our outlook for the 2nd half of the year will know that significant pitfalls exist for sterling in the coming months, that will likely limit GBP upside. We expect GBPEUR to trade around current levels for a while so a more constructive move higher in the pair should be welcome news for those looking to hedge good levels.

This morning has started in fairly low-key fashion although the Nationwide’s measure of house prices has shown a 2nd consecutive month of price declines. This could be enough at the margin to push the Bank of England into additional stimulus if wider housing demand falls through the rest of the year.

UK manufacturing sentiment numbers are due at 09.30 this morning

Euro

The single currency remains in a form of consolidation against the USD as we enter July but we do think that the coming months will be a positive for the euro given both political movements and the region’s relative success in containing the Covid-19 virus.

Our first target for the pair in the coming months is 1.14 with a stretch target in the next year as high as 1.18. A lot needs to happen for these to come true but the early signs are positive.

US Dollar

Market psychology is back into a balancing act of improving economic data and worsening coronavirus figures from a number of places around the world. For the moment, better than expected economic data is keeping the USD on the back foot but we have seen that catalyst run out of juice before; the US’s manufacturing sentiment numbers are due at 3pm.

The US’s top Covid-19 expert Dr Anthony Fauci warned yesterday that new cases of the disease could breach 100,000 a day from its current level of around 40,000 given the lack of public take up of mask wearing and social distancing.

Yesterday saw Texas report record new cases with California seeing its 2nd-largest jump in confirmed infections.

Elsewhere

June’s Chinese manufacturing sentiment number overnight has been received positively as it confirmed firmer external support for the Chinese economy. External demand should continue to strengthen in the coming months, as the gradual re-opening of many other economies buoys demand for the country’s exports.

Have a great day and please take care.

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.