The euro slipped on Friday as consumer confidence in the eurozone in May stayed close to the 22-month low reached in March.
Sterling is rising this morning however, with GBP/EUR climbing to €1.1332 and GBP/USD rallying to $1.2289. GBP/NZD has surged to NZ$2.0438, while GBP/AUD and GBP/CAD hold steady at AU$1.8978 and C$1.7269 respectively.
In the spotlight today is the UK’s latest GDP figures, where a smaller-than-expected contraction of growth looks to support the pound through the session.
What’s been happening?The pound trended lower again through Tuesday’s European trading session as confusion over the UK’s government’s lockdown message continued weighing on sentiment.
Further limiting Sterling’s appeal were concerns over a potential no-deal Brexit this year as trade talks between the UK and EU appear to be going nowhere fast.
However, helping trim the pound’s losses was the announcement from Chancellor Rishi Sunak that the government’s coronavirus wage subsidy scheme would remain until October, easing fears an early end to the plan could cost millions of jobs.
The US dollar also fell back yesterday as US inflation printed below expectations in April and renewed speculation the Federal Reserve may be forced to cut interest rates below zero this year.
This weakness in the US dollar helped bolster the appeal of the euro on Tuesday, which advanced despite growing concerns Europe could suffer a second coronavirus outbreak as more countries start to reopen their economies.
What’s coming up?Turning to today’s session, the focus is on the UK GDP figures published earlier this morning.
These revealed the UK economy shrank at its fastest pace since the financial crisis as growth contracted by 2% in the first quarter of 2020.
However, this beat forecasts of a larger 2.5% drop, something which may help the pound to recoup some of its recent losses.
In the US, all eyes are on Federal Reserve Chairman Jerome Powell’s testimony in front of the US Senate later this afternoon.
Should Powell drop any hints that suggest the Fed could explore the possibility of negative interest rates, then we expect to see the US dollar continue weakening through today’s session.
For EUR investors the focus will be on the Eurozone’s latest industrial production figures, where an expected record drop in factory output in March will likely weigh on the euro.
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)