The pound retreated on Thursday after the Bank of England (BoE) struck a more cautious tone than expected following its latest policy meeting.
Meanwhile, the pound is holding steady this morning ahead of a packed data calendar, with GBP/EUR flat at €1.1013 and GBP/USD muted at $1.2950. GBP/CAD is rangebound at C$1.7334, while GBP/AUD and GBP/NZD hold steady at AU$1.8136 and NZ$1.9540, respectively.
In the spotlight today will be the latest US GDP estimate. Will a dramatic plunge in growth in the second quarter weigh heavily on the US dollar?
What’s been happening?The US dollar remained under considerable selling pressure on Wednesday in the wake of the Federal Reserve’s latest policy meeting.
While the Fed kept rates on hold as expected, the bank’s forward guidance was notably bleak, with policymakers expressing their concern over the recent resurgence of coronavirus in the US and warning it ‘poses considerable risks to the economic outlook over the medium term’.
The persistent USD selling bias was a key catalyst in allowing the GBP/USD exchange rate to briefly break past the $1.30 barrier yesterday, which in turn helped to push the pound higher against the rest of its peers.
This upside in Sterling was likely further supported by the Bank of England’s latest housing figures as the BoE reported a sharp jump in mortgage approvals last month.
The euro, meanwhile, was left adrift through yesterday’s session, catching some buying action on the back of the US dollar’s weakness, but without any strong directional bias.
What’s coming up?Looking ahead, it is poised to be a busy session in currency markets today with a slew of high impact data releases.
Likely having the biggest impact on markets will be the publication of the latest US GDP estimate later this afternoon.
The preliminary reading for the second quarter is forecast to report the US economy shrank by a whopping 34.1%, confirmation of which could put some significant pressure on the US dollar.
At the same time, EUR investors will be kept on their toes by the publication of Germany’s own GDP figures, with traders eager to see just how deep a recession the Eurozone’s largest economy has found itself in this year.
Finally, the pound could be forced to retreat from its current highs through the second half of the week as there appears to be little chance of the latest round of Brexit talks having yielded any meaningful progress.
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)