The pound initially appeared to be in a strong position last week, with the currency firming through the start of the session, amidst an upbeat market mood.
Meanwhile the pound is trading in a narrow range so far this morning, with GBP/EUR flat at €1.1740 and GBP/USD muted at $1.3955. GBP/CAD is rangebound at C$1.7366, while GBP/AUD and GBP/NZD hold steady at AU$1.8907 and NZ$1.9937 respectively.
Coming up, could an upbeat Eurozone GDP reading send the euro higher this morning?
What’s been happening?The US dollar came under additional selling pressure yesterday, in the wake of the latest US GDP estimate.
USD investors were left disappointed after the growth came in well below expectations in the second quarter, with the US economy expanding by 6.5% against forecasts for a bumper 8.5% expansion.
The lacklustre GDP reading was seen as reaffirming the Federal Reserve’s current stance that the US economy is still not ready for the bank to start tightening its monetary policy.
This pullback in the US dollar directly benefitted the euro, thanks to the strong negative correlation in the world’s most traded currency pairing, with the upside in the single currency being reinforced by some positive Germany economic releases.
At the same, the pound was able to maintain a positive trajectory yesterday, in spite of concerns that new coronavirus cases are on the rise again in the UK, as well as worries about the potential economic disruption being caused by the ‘pingdemic’.
What’s coming up?Top of the agenda today will be the publication of the Eurozone’s own GDP estimate.
Economists forecast growth in the Eurozone will have rebounded in the second quarter, after the bloc suffered a double-dip recession over the winter, likely buoying demand for the euro this morning.
Also potentially boosting EUR exchange rates will the Eurozone's consumer price index, which is expected to report inflation in the bloc rebounded this month.
For USD investors the focus today will be on the PCE price index, the Federal Reserve’s preferred indicator for inflation. While price growth is expected to have accelerated last month, the Fed’s current dovish stance could limit any upside in the US dollar.
In the meantime, GBP investors will be keeping an eye on domestic coronavirus developments for fresh impetus today.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)