The US dollar remained well supported on Friday, with the currency continuing to catch bids in light of the Federal Reserve’s recent hawkish shift.
Meanwhile, Sterling opens this week on stable footing, with GBP/EUR steady at €1.1168 and GBP/USD buoyed at $1.2649. GBP/CAD and GBP/AUD are holding steady at C$1.7165 and AU$1.8141 respectively, while GBP/NZD ticks up to NZ$1.9260.
Coming up, will we see coronavirus concerns infuse some fresh volatility in currency markets this week?
What’s been happening?The pound found some gains at the end of last week’s session amidst a slight improvement in market sentiment.
However, limiting the upside in Sterling were some lingering Brexit jitters, with GBP investors growing increasingly concerned that July’s intensified talks will fail to provide a breakthrough. This followed EU’s reports of ‘significant differences’ following the latest round of talks in London.
At the same time, the euro was left muted through Friday’s trading session as investors express their concerns over the EU’s €750bn coronavirus fund.
EU leaders will hold a summit later this week in which the fund looks set to be the main talking point, but with the so-called ‘frugal four’ - Sweden, the Netherlands, Denmark and Austria - still resistant to the fund in its current form, EUR investors fear leaders may fail to reach an agreement.
The US dollar, meanwhile, initially strengthened on Friday, with investors favouring the safe-haven currency in light of ongoing coronavirus concerns as well as comments from presumptive Democratic nominee Joe Biden, which spooked Wall Street.
However, the ‘Greenback’ ultimately closed the session on a sour note after the US reported a surprise contraction in producer prices in June.
What’s coming up?Turning to this week’s session, it is likely we will see uncertainty over the recent rise in coronavirus cases continue to influence markets.
This could see the US dollar tick higher this week, especially if US political jitters also begin to weigh on market sentiment.
For GBP investors the main catalyst of movement looks to be the UK’s latest GDP figures, with the pound potentially strengthening if the UK economy expanded faster-than-expected in May.
In the EU, the focus will be on the latest ZEW economic surveys. Will another improvement in Eurozone economic sentiment this month offer some support to 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)