Pound to rally as UK prepares to ease coronavirus lockdown measures?

The pound was left on the back foot on Friday, after some weaker-than-expected domestic retail sales figures.

Sterling is making tentative gains this morning, however, with GBP/EUR ticking up to €1.1208 and GBP/USD jumping to $1.2255. GBP/CAD is stable at C$1.7067, while GBP/AUD and GBP/NZD hold steady at AU$1.8601 and NZ$1.9938 respectively.

Coming up, will the pound be able to sustain its recovery as investors digest Boris Johnson’s announcement that the UK is to begin easing its coronavirus lockdown next month?

What’s been happening?

The pound was mostly subdued through the end of last week’s session as some weaker-than-expected UK retail sales figures limited any upside in GBP exchange rates.

Amidst the thin trade of the bank holiday weekend, we have seen Sterling begin to mount a recovery as GBP investors welcome the news that the UK government is preparing to loosen coronavirus restrictions.

The euro was also left directionless on Friday, with the minutes from the European Central Bank’s (ECB) latest policy meeting being largely ignored by EUR investors.

The single currency remained in a narrow range through yesterday’s session as well, after German GDP figures confirmed Europe’s largest economy has fallen into a sharp recession at the start of 2020.

Finally, a bout of risk aversion helped to propel the US dollar higher at the end of last week’s session, with rising tensions between the US and China once again souring the market mood.

However, the ‘greenback’ began to relinquish these gains on Monday, amidst some broad USD selling that appeared to lack any fundamental catalyst.

What’s coming up?

Looking ahead, the pound looks to accelerate this morning as UK markets reopen after the bank holiday and GBP investors welcome Boris Johnson’s announcement that all non-essential shops can reopen from 15 June.

However, these gains could be capped by the publication of the Confederation of British Industry’s (CBI) distributive trades index, which is expected to show that UK retail activity remained near historic lows in May.

The euro may also find some support through today’s session as coronavirus cases continue falling in Europe buoying sentiment.

A more upbeat market mood looks to limit the appeal of the US dollar today, with a sharp fall in US new home sales in April likely to apply further pressure this afternoon.