The US dollar traded in a wide range yesterday, initially stumbling amid Omicron fears, before rallying sharply after Federal Reserve Chair Jerome Powell’s tapering comments.
Sterling is trading a little more robustly so far this morning, with GBP/EUR ticking up to €1.1832 and GBP/USD buoyed at $1.3783. GBP/CAD is rangebound at C$1.7019, while GBP/AUD and GBP/NZD hold steady at AU$1.8400 and NZ$1.9233 respectively.
Looking ahead, will another deterioration in German business morale soften the euro this morning?
What’s been happening?The pound was initially met by some selling pressure on Friday, after the UK’s latest retail sales figures raised concerns over consumer spending as they reported the fifth consecutive contraction of sales growth in September.
However, Sterling was able to rebound by the end of the session, thanks to some stronger-than-expected PMI releases and positive Brexit headlines.
Meanwhile, the US dollar fell back at the end of last week, as demand for the safe-haven currency waned amidst improving risk appetite, after embattled Chinese property giant, Evergrande managed to make a $83.5m payment ahead of a key debt deadline.
The USD selling bias helped to prop up demand for the euro on Friday, thanks to the strong negative correlation between the world’s most traded currency pairing.
This allowed the single currency to strengthen in spite of the Eurozone’s latest PMI figures reporting that economic activity in the bloc’s private sector slowed more than expected this month.
What’s coming up?Turning to this week, the session will be kicked off with the release of Germany’s latest business climate index.
This may exert some pressure on the euro this morning as October’s index is forecast to report another deterioration in business morale.
For USD investors, the focus will be on the upcoming Dallas manufacturing index, which could limit the appeal of the US dollar later this afternoon as economists predict it will reveal factory activity in Texas continued to decline this month.
Finally in the absence of any notable GBP data releases, the direction of the pound may be driven by domestic coronavirus developments, amidst suggestions the government could soon impose its ‘Plan B’ measures.
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)