GBP stages modest recovery amid upbeat market sentiment

The pound firmed against some of its rivals on Thursday as global market sentiment continued to recover from the panic earlier in the week.

Meanwhile, the pound is subdued so far this morning, with GBP/EUR and GBP/USD edging marginally higher at €1.1687 and $1.2768, respectively. GBP/CAD is also posting modest gains at CA$1.7527, while GBP/AUD wavers around AU$1.9364 and GBP/NZD slips to NZ$2.1191.

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

What’s been happening?

After a largely subdued morning, a return to upbeat trading conditions lifted the pound against its safe-haven rivals later in the session, due to its increasingly risk-sensitive nature.

Elsewhere, traders seemed to reposition after a brief period of GBP overselling earlier this week, lending Sterling additional support.

Meanwhile, the US dollar gained some mild traction during the latter part of the session amid some better-than-expected jobs data.

Initial jobless claims fell notably more than forecast last week, thereby softening concerns of a deteriorating US labour market and propping up the ‘greenback’ after a week of tumultuous trade.

The euro, meanwhile, struggled to find a clear direction against its rivals amid a lack of data. However, a strengthening USD later stymied the single currency, due to the pairing’s negative trading relationship.   

What’s coming up?

Turning to today, the ongoing market response to the latest German inflation data could drive EUR movement. Confirmation of persistent inflationary pressures in the Eurozone’s largest economy could boost the single currency.

Amid a lack of fresh US data, the ‘greenback’ could face further headwinds as markets recall Federal Reserve policymaker Thomas Barkin’s latest commentary, in which the rate-setter signalled that interest rate cuts are on their way.

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

Meanwhile, in the absence of any notable UK releases, market risk dynamics could influence movement in the pound today.

A recovering market sentiment could lend the increasingly risk-sensitive pound support. However, markets are poised for another day of anxious trade.