GBP recovers in tandem with improving market sentiment

The pound began to stabilise on Wednesday following recent market turbulence, amid an increasing appetite for risk.

Meanwhile, the pound is subdued so far this morning, with GBP/EUR and GBP/USD muted at €1.1607 and $1.2694, respectively. GBP/CAD and GBP/NZD are also flat at CA$1.7439 and NZ$2.1179, while GBP/AUD slides to NZ$1.9387.

Looking ahead, could cheery trade continue to permeate global markets, thereby boosting GBP?

What’s been happening?

The pound initially stumbled yesterday morning as concerns over recent civil unrest across the UK undermined hopes of British political stability. 

However, an improving global market sentiment later saw GBP rise against its safe-haven peers due to its increasingly risk-sensitive nature.

Meanwhile, the US dollar’s brief recovery came to a standstill as cheery trade undermined the safe-haven ‘greenback’. Additionally, expectations of an aggressive monetary unwinding cycle by the Federal Reserve next month weighed on USD.

Elsewhere, the euro struggled to find a clear direction against its rivals following the release of some mixed German industry data.

While German industrial production exceeded forecasts in June, Germany’s trade surplus saw a sharp decline during the same period, reinforcing concerns for the export-heavy economy.

However, bullish trading conditions ultimately saw the safer euro tumble against its riskier peers.

What’s coming up?

Turning to today, the latest initial jobless claims figure is due for release in the US. The number of US citizens claiming unemployment benefits is due to waver close to a yearly high, which will likely reinforce concerns of a deteriorating US labour market.

In turn, heightened Fed rate cut bets may dent USD exchange rates in the afternoon.

In the evening, a speech by Fed policymaker Thomas Barkin may further impact USD exchange rates. Should Barkin advocate for imminent monetary loosening, echoing the sentiment of analysts amid growing US recession fears, the ‘greenback’ may relinquish its modest recovery.

Meanwhile, in the absence of any notable UK or Eurozone data, market risk dynamics could dictate movement in both the pound and the euro today.