Pound extends recovery in risk-positive trade

The pound firmed against some of its rivals on Friday as global market sentiment continued to recover from the selloff at the start of the week.

Meanwhile, the pound is subdued so far this morning, with GBP/EUR and GBP/USD trading sideways at €1.1691 and $1.2766, respectively. GBP/CAD is also flat at CA$1.7519, while GBP/AUD and GBP/NZD dip to around AU$1.9344 and NZ$2.1186.

Looking ahead, could an ongoing recovery in market sentiment see GBP climb higher?

What’s been happening?

A cautiously upbeat market sentiment lifted the increasingly risk-sensitive Pound against its safer rivals through Friday’s session.

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

In contrast, the US dollar faced headwinds amid a lack of data and firming Federal Reserve interest rate cut bets. The safe-haven currency also faced headwinds amid an increasing appetite for risk.

The euro, meanwhile, struggled to find a clear direction against its rivals despite confirmation of persistent price pressures in the Eurozone’s largest economy.

Analysts noted that stubborn services inflation is an upward driver for Germany’s sticky consumer price index. However, EUR was unable to capitalise on any shifting European Central Bank (ECB) interest rate cut bets as markets continued to stabilise following recent market turbulence.

What’s coming up?

Turning to today, an absence of new data in the UK, US and the Eurozone could see each respective currency trade without a clear direction.

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 the likelihood of September rate cuts.

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

Meanwhile, movement in the pound may be limited today as GBP investors brace for upcoming UK data. Markets will have to contend with several high-impact releases this week, starting with the UK’s latest jobs report on Tuesday.

Finally, will a positive market mood see the safe-haven euro fall against its riskier counterparts this morning?