GBP/USD soars on lockdown easing hopes

Philip McHugh June 23rd 2020 - 2 minute read

The pound rallied on Monday, making particularly strong gains against the US dollar in response to growing hopes for the reopening of more of the UK economy.

Sterling is struggling to build on these gains this morning, however, with GBP/EUR muted at €1.1065 and GBP/USD subdued at $1.2476. GBP/CAD is flat at C$1.6889, while GBP/AUD and GBP/NZD hold steady at AU$1.8054 and NZ$1.9265 respectively.

The latest PMI flashes from the UK and Eurozone will be the main focus for today, with investors eager to see how well the private sector is faring on both sides of the Channel.

What’s been happening?

The pound opened this week’s session on some solid footing, buoyed by positive market sentiment and hopes that more of the UK economy is set to open in the coming weeks.

GBP investors were particularly cheered by reports that Boris Johnson will announce later today whether the hospitality sector can reopen on 4 July as well as an update on if the government will relax the 2m social distancing rule.

Trade in the euro was mixed yesterday, with the single currency getting off to a slow start after EU leaders failed to reach an agreement over the EU recovery fund in last week’s EU Summit. The euro later found support following a modest improvement in Eurozone consumer sentiment this month.

Meanwhile the US dollar floundered on Monday, with demand for the safe-haven currency weakening in response to improved market sentiment. Further pressure came as US existing home sales were shown to have fallen faster than expected in May.

What’s coming up?

Looking ahead, investors will have a whole host of PMI data to keep them busy.

In the UK, June preliminary figures are expected to show a marked improvement in private sector activity, part in thanks to the reopening of non-essential stores earlier in the month.

Coupled with Johnson’s announcement later today, this may help to give the pound a strong boost.
The Eurozone PMIs are expected to show a similar improvement in economic activity this month, likely offering some support to the euro.

Finally, we have the US PMI figures, while Markit’s preliminary releases aren’t as influential as the ISM figures, we may still see some movement in the US dollar if there is a notable improvement in June.

Written by
Philip McHugh

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