The pound trended broadly lower through June, the currency being primarily undermined by concerns over the UK’s economic trajectory.
Meanwhile, the pound is mostly buoyant this morning with GBP/EUR stable at €1.1931 and GBP/USD steady at $1.3044. GBP/CAD has appreciated to C$1.6660, while GBP/AUD and GBP/NZD surge to AU$1.7999 and NZ$1.9228, respectively.
Looking ahead, a cautious mood amid the Ukraine crisis and concerns Russia could default on a debt payment may see investors favour the US dollar today.
What’s been happening?
The euro traded with modest gains at the start of Friday’s session, with the single currency finding support amidst renewed hopes for diplomatic solution to the war in Ukraine.
This followed comments from Vladimir Putin who noted ‘certain positive shifts’ from Ukraine in peace talks and hinted at the possibility of direct talks with Ukrainian President Volodymyr Zelenskyy.
However these gains were later reversed as subsequent reports suggested limited progress had been made.
Supporting the pound at the end of last week was the publication of the UK’s latest GDP figures, which printed well above expectations.
The Office for National Statistics (ONS) reported the UK economy grew by 0.8% in January, versus the 0.2% expansion forecast. The upbeat figures helped to fuel hopes for a strong economic expansion in the first quarter.
Meanwhile, an improvement in risk appetite initially undermined demand for the safe-haven US dollar at the end of last week, before a subsequent souring of market sentiment helped the ‘greenback’ to rally.
However tempering the upside in USD exchange rates was the University of Michigan’s latest consumer sentiment index, which fell to a new decade low this month, mostly due to concerns over inflation.
What’s coming up?
Turning to this week’s session, it seems safe to assume that the currency market will remain sensitive to developments in Ukraine. This could help to underpin the US dollar if the conflict continues to intensify.
Otherwise, the focus in the first half of the week is likely to be on the UK’s latest jobs report.
While an expected fall in unemployment in January may reflect positively on the pound, it’s the accompanying wage growth figures which may prove to be the most impactful. An acceleration of wage growth could help to ease cost-of-living concerns and bolster Sterling.
Also of note will be the publication of Germany’s ZEW economic sentiment index. This may see the euro plunge as economists predict the conflict in Ukraine will have triggered a sharp deterioration in sentiment.
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)