EUR/USD strikes two week-high

The euro got off to a robust start this week, striking a two-week high against the US dollar.

Meanwhile the pound is subdued at the start of today’s session, with GBP/EUR dipping to €1.1575 and GBP/USD muted at $1.2258. GBP/CAD and GBP/AUD have fallen to C$1.5746 and AU$1.7664, respectively, while GBP/NZD is stable at NZ$1.9499.

Looking ahead, will a record slump in German consumer confidence push the euro lower today?

What’s been happening?

The euro firmed at the start of this week, with its initial strength coming on the back of broad US dollar weakness due to the strong correlation between the pairing.

While these gains were trimmed later in the session amidst a small correction, the euro largely held on to its gains throughout the European session.

The US dollar opened on the back foot yesterday as a prevailing risk-on mood limited the appeal of the risk-sensitive currency.

However USD exchange rates bounced back later in session, underpinned by an uptick in US Treasury yields and surprisingly upbeat US durable goods figures.

After an initial spike, the pound was placed on the defensive on Monday, with GBP investors reluctant to make any aggressive bets ahead of a House of Commons vote on legislation which would allow the government to unilaterally change the Northern Ireland protocol.

What’s coming up?

Today’s session was kicked off by the publication of Germany’s latest consumer confidence figures. July’s confidence index placed the euro on the back foot as morale in the Eurozone’s largest economy fell to a new all-time low.

This will be followed by a speech from several European Central Bank (ECB) policymakers, including President Christine Lagarde. Any hawkish remarks could help to bolster the euro.

A speech by the Bank of England’s (BoE) Jon Cunliffe is likely to be in focus for GBP investors this morning and could dent the pound if he strikes a broadly dovish tone.

Finally in the absence of any notable US economic data, the direction of the US dollar is likely to be determined by market sentiment, potentially leading to losses for the ‘greenback’ if sentiment remains broadly upbeat.