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Pound seesaws amid UK political jitters

currency-newsPound seesaws amid UK political jitters
The pound fluctuated on Tuesday amid fresh questions over Boris Johnson’s future as prime minister.

Sterling is mixed at the start of today’s session, with GBP/EUR flat at €1.1753 and GBP/USD subdued at $1.2557. GBP/CAD has slipped to C$1.5741, while GBP/AUD and GBP/NZD hold steady at AU$1.7433 and NZ$1.9445, respectively.

The Eurozone’s latest GDP figures are the only release of note today and may only have a limited impact on the euro ahead of tomorrow’s European Central Bank (ECB) interest rate decision.

What’s been happening?

The pound stumbled out of the gates yesterday. A narrower-than-expected victory for Boris Johnson in Monday’s no-confidence vote stoked fears of prolonged UK political uncertainty.

However, these initial losses were reversed by the end of the European trading session as the UK’s latest services PMI saw May’s finalised index revised higher.

The euro also faced some selling pressure at the start of Tuesday’s session after Germany reported an unexpected contraction in factory orders in April.

The single currency’s negative correlation with the US dollar also contributed to the pressure on EUR exchange rates yesterday as the latter strengthened.

This uptick in the US dollar was primarily driven by safe-haven demand, amidst a souring of market sentiment.

The downbeat mood was at least partially attributed to the World Bank’s slashing of its 2022 global growth forecast.

What’s coming up?

The publication of the Eurozone’s latest GDP figures looks to be the most high-profile data release today. The latest release is expected to confirm the Eurozone economy expanded by 0.3% in the first quarter of the year.

However even a surprise outcome could have a limited impact on the euro, with EUR investors likely to be reluctant to make any aggressive bets ahead of the European Central Bank’s interest rate decision on Thursday.

In the UK we may see ongoing political jitters continue to infuse volatility into the pound today.

Across the pond a lull in impactful data may see the US dollar continue to be driven by market risk appetite. Expect to see the US dollar maintain its positive trajectory so long as a cautious mood continues to prevail.
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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