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GBP/EUR spikes on hawkish BoE comments

currency-newsGBP/EUR spikes on hawkish BoE comments
The pound rallied on Thursday as GBP investors seized on some hawkish comments from a Bank of England (BoE) policymaker.

Meanwhile, Sterling is off to a slow start this morning, with GBP/EUR flat at €1.1698 and GBP/USD subdued at $1.3817. GBP/CAD has dipped to C$1.7378 while GBP/AUD and GBP/NZD hold steady at AU$1.8597 and NZ$1.9701 respectively.

Coming up, will another contraction in US retail sales drive the US dollar lower this afternoon?

What’s been happening?

The pound got off to a poor start yesterday, dipping in response to the UK’s latest jobs figures, after they reported a shock rise in the unemployment rate in May.

However, Sterling then saw a sharp upswing in the second half of the European session, following a speech by Bank of England policymaker Michael Saunders, who suggested that the bank will soon begin discussions about tapering its bond purchases, whilst also hinting at the possibility of early rate hikes.

The US dollar also strengthened on Thursday, with demand for the safe-haven currency being bolstered amidst a souring market mood.

This upside in USD exchange rates was reinforced by the latest US employment release, which revealed new jobless claims fell to a new post-pandemic low in the first week of July.

The euro, meanwhile, was placed on the defensive yesterday as the single currency’s strong negative correlation with the US dollar saw it stumble as USD exchange rates moved higher.

What’s coming up?

Top of the agenda today will be the publication of the latest US retail sales figures later this afternoon.

This could see the US dollar face some headwinds today as economists forecast sales growth will have contracted again last month, albeit at a more modest pace than in May.

In the meantime, the Eurozone will publish its latest consumer price index this morning. June’s finalised figures are expected to confirm inflation in the bloc slowed to 1.9%, potentially limiting the appeal of the euro today.

In the absence of any notable GBP data releases, the pound could struggle to find support today, particularly amidst a continued rise in UK coronavirus cases, which is casting some doubt over the sustainability of the government’s reopening plans.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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