The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
Sterling appears happy to consolidate these gains this morning, as GBP/EUR holds at €1.1396, GBP/USD edges up to $1.3038 and GBP/CAD stabilise at C$1.7018, while GBP/AUD and GBP/NZD hold steady at AU$1.8005 and NZ$1.9548 respectively.
Looking ahead, the US dollar may strike back later today if US payrolls rose in line with expectations last month.
What’s been happening?
The pound roared higher yesterday, carrying Wednesday’s momentum into the second half of the week on the back of renewed Brexit optimism and a slightly more hawkish outlook from the Bank of England.
Sterling’s initial gains on Thursday were mostly driven by reports that Theresa May had reached a deal with the EU to ensure UK financial services firms would continue to have access to the European market after Brexit.
While sentiment was dampened slightly as a government source advised people to not ‘get ahead of themselves’, the pound quickly found its feet again in the wake of the BoE’s latest rate decision as markets welcomed the Bank’s more upbeat outlook on both Brexit and the UK economy.
Thursday’s jump in the pound was most clearly evident in the GBP/USD exchange rate, with the pairing rocketing up as much as 1.6% as softening demand for safe-haven currencies and a weaker-than-expected US manufacturing PMI left the US dollar vulnerable.
Meanwhile the GBP/EUR exchange rate also surged higher during yesterday’s session, although the pairing gains proved more modest as the broad weakness in the US dollar led to a number of investors turning to the euro.
What’s coming up?
The highlight of today’s trading session for investors looks set to be the release of the latest US labour figures.
This may result in the US dollar recouping some of yesterday losses later this afternoon as investors brace for a pick-up in US payroll figures.
Meanwhile the UK will publish its latest construction PMI this morning, potentially trimming demand for the pound if Britain’s construction sector witnesses a similar slowdown to its manufacturing sector last month.
Finally the euro may remain subdued in trade today as data is expected to confirm that Eurozone factories expanded at their slowest pace in 26-months in October.
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)