GBP/EUR strikes two-month low in BoE driven sell-off

The pound tumbled on Friday, with investors remaining wary of the UK currency amidst speculation the Bank of England (BoE) will likely be forced to introduce more monetary easing in the future.

Sterling appears to be on stable footing at the start of this week, however, with GBP/EUR flat at €1.1060 and GBP/USD stable at $1.2377. GBP/CAD is rangebound at C$1.6820, while GBP/AUD and GBP/NZD hold steady at AU$1.8039 and NZ$1.9252 respectively.

Looking ahead, the pound could recoup some of its losses this week, with the publication of the UK’s latest PMI figures.

What’s been happening?

The pound closed last week’s session on the back foot, with the currency plunging to its worst levels since March against the euro as the Bank of England driven sell-off intensified.

This appeared to be attributed to speculation that the BoE may implement additional monetary easing in the future.

These concerns also offset a strong retail sales report from the UK, revealing sales growth rebounded 12% in May following the reopening of DIY stores and garden centres.

The euro was mostly rangebound through Friday ahead of a virtual EU summit, in which EU leaders failed to reach an agreement over the EU’s €750bn coronavirus recovery fund.

Finally, the US dollar traded in a narrow range at the end of last week’s session, with demand for the safe-haven currency dented by improving market sentiment as well as comments from Federal Reserve Chair Jerome Powell warning ‘the path ahead for the US economy is likely to be challenging’.

What’s coming up?

Turning to this week, the pound may mount a recovery in the first half of the session with the publication of the UK’s latest PMI figures.

June’s preliminary figures are expected to show that private sector activity continued to recover this month,
with a notable narrowing of contraction in the manufacturing sector while service sector activity may see a more modest improvement given shops only started to reopen on the 15^th June.

Across the Channel, the focus will be on the Eurozone’s own PMI releases, with the euro expected to rally if the easing of lockdown restrictions throughout Europe has helped economic activity in the bloc rebound.

For USD investors, the focus this week looks to be on the latest US durable goods orders release, with a strong rebound in order growth last month potentially lifting the US Dollar.