Euro jumps half a cent in risk-on trade

Philip McHugh May 21st 2021 - 2 minute read

The US dollar was undermined by broad selling pressure on Thursday as an improving market mood limited the appeal of the safe-haven currency.
Meanwhile, the pound is steady this morning, with GBP/EUR flat at €1.1595 and GBP/USD range-bound at $1.4175. GBP/CAD is stable at C$1.7134, while GBP/AUD and GBP/NZD have advanced to AU$1.8304 and NZ$1.9741 respectively.
Looking ahead, the UK and Eurozone’s PMI figures could be the main catalyst of movement today.

What’s been happening?

The US dollar fell back yesterday thanks to a risk-on mood and a drop in US Treasury yields.
Last week’s US jobless claims did temper these losses however, with applications falling to a new post-pandemic low in the second week of May.
This drop in the US dollar directly benefited the euro due to the negative correlation in the world’s most traded currency pairing.

The single currency was also supported by rising optimism in the Eurozone, triggered by the reopening of economies and progress in the EU’s vaccine rollout.
The pound, meanwhile, traded in a narrow range on Thursday after the Confederation of British Industry (CBI) reported its industrial order index turned positive for the first time since February 2019.
This was enough to prevent Sterling from weakening amid growing concern over the spread of the Indian coronavirus variant in the UK.

What’s coming up?

Kicking off today’s session was the publication of the UK’s latest retail sales figures.
The release revealed sales growth rocketed to a 10-month high in April, offering some support to the pound in initial trade.
Also in focus for GBP investors today will be May’s preliminary PMI releases. The data is forecast to show that economic activity in the UK’s private sector expanded further, having previously struck a seven-year high in April.
The publication of the Eurozone’s own preliminary PMIs may extend the upside in the euro this morning, assuming the bloc’s manufacturing and services sectors also expanded at a robust pace this month.
Finally, the spotlight for USD investors today will be on a speech by the Federal Reserve’s Robert Kaplan. He could send the US dollar higher if he offers any more tapering hints.

Written by
Philip McHugh

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