A -2.6% monthly GDP contraction weighed heavily on the pound as worries over the UK’s economic outlook picked up again.
Sterling appears to be consolidating these gains so far this morning, with GBP/EUR flat at €1.1030 and GBP/USD stable at $1.2390. GBP/CAD is rangebound at C$1.6800, while GBP/AUD and GBP/NZD hold steady at AU$1.7936 and NZ$1.9188 respectively.
In the spotlight today, we have the latest ISM manufacturing PMI. Will a solid showing by the US factory sector last month help to bolster the US dollar this afternoon?
What’s been happening?The pound initially got off to a poor start yesterday, with Sterling retreating as the final release of the UK’s first quarter GDP figures saw domestic growth revised down from -2% to –2.2%.
However, GBP exchange rates bounced back as Boris Johnson outlined his post-coronavirus recovery plan and vowed to fix longstanding economic problems in the UK.
This upside in Sterling was then further supported by some end of month flows, with investors correcting their positions in the currency after some bearish pressure on the currency in recent weeks.
The euro also found some modest support on Tuesday as EUR investors welcomed the Eurozone’s latest consumer price index as inflation in the bloc accelerated faster than expected in June.
At the same time, the US dollar ticked lower yesterday, undermined by a modest improvement in market sentiment and some end-of-the-month profit taking.
What’s coming up?Turning to today’s session, the focus looks to be on the latest ISM manufacturing PMI, where a notable improvement in US factory activity last month is likely to buoy the US dollar.
Also influencing the US dollar will be the latest ADP employment report, where a strong rebound in employment growth last month is likely to be welcomed by USD investors and bolster expectations for Thursday’s more influential payroll figures.
The euro also looks set to gain today, after data printed earlier this morning showed a solid rebound in German retail sales in May.
The pound, meanwhile, may struggle to consolidate its recent gains as Brexit uncertainty and concerns about local flare ups in UK coronavirus cases are likely to weigh on Sterling 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)