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Pound fluctuates in uneven trade

currency-newsPound fluctuates in uneven trade
Trade in the pound was mixed on Monday as a result of bearish trading conditions and revived Brexit uncertainty.

Sterling is mostly rangebound so far this morning, with GBP/EUR flat at €1.1668 and GBP/USD muted at $1.2329. GBP/CAD is stable at C$1.6056, while GBP/AUD and GBP/NZD hold steady at AU$1.7733 and NZ$1.9516, respectively.

In the spotlight today will be Germany’s ZEW economic sentiment index. Will another deterioration in sentiment send the euro lower?

What’s been happening?

The pound got off to a shaky start this week, with the currency initially finding some support as markets were relieved Vladimir Putin did not use his speech at Russia’s Victory Day parade to announce an escalation of his war with Ukraine.

However, another slump across equity markets ultimately saw a bearish market mood prevail yesterday, which alongside fresh Brexit uncertainty following Sinn Féin’s victory in the Northern Irish elections, capped Sterling’s gains.

GBP exchange rates were then pressured by comments from Bank of England (BoE) policymaker Michael Saunders in which he warned domestic inflation could rise above the bank’s current 10% forecast.

The euro, meanwhile, also benefited from Putin’s fairly conservative Victory Day speech amidst fears an escalation could be more damaging for the Eurozone economy.

But these gains were quickly offset by the Eurozone’s latest Sentix index as it reported investor morale in the Eurozone slumped to a near two-year low.

Finally, after initially stumbling amid a market correction, the US dollar was able to close yesterday’s European session with modest gains as risk-off flows buoyed demand for the safe-haven currency.

What’s coming up?

The publication of Germany’s latest ZEW economic sentiment index will be a key focus for EUR investors this morning.

Economic morale in the Eurozone’s largest economy is forecast to have deteriorated again in May, potentially limiting the upside potential of the euro today.

For GBP investors the focus will be on the Queen’s speech, with markets eager to see how the UK government plans to tackle the cost of living crisis and boost growth.

Meanwhile, USD investors will look to a slew of Federal Reserve speeches for fresh impetus today. A broadly hawkish consensus could bolster the appeal of the US dollar.
Philip McHugh

Philip McHugh

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)

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