The pound initially opened last week’s session on stable footing as GBP investors welcomed Scotland’s lifting of its remaining coronavirus restrictions.
Meanwhile, the pound is muted in initial trade this morning, with GBP/EUR subdued at €1.1698 and GBP/USD flat at $1.3874. GBP/CAD and GBP/NZD are holding steady at C$1.7290 and NZ$1.9858 respectively, while GBP/AUD sinks to AU$1.8524.
Coming up, will a softening of US inflation potentially limit any upside potential in the US dollar today?
What’s been happening?The US dollar got off to a strong start this week, with investors favouring the safe-haven currency amidst a prevailing risk-adverse environment.
This souring of market sentiment was attributed to ongoing concerns over the resurgence of coronavirus cases in many parts of the world and the potential impact on the global economic recovery.
However, USD exchange rates subsequently weakened as the US trading session go underway, as a rally in equity markets helped to cheer investors.
The euro, meanwhile, suffered on Monday as a result of some dovish comments made by European Central Bank (ECB) President Christine Lagarde over the weekend.
In an interview with Bloomberg, Lagarde spoke about potential changes to the ECB’s forward guidance following its July policy meeting, with hints that this could include extending the bank’s bond-buying programme into 2022.
At the same time, the pound was left subdued on Monday, as optimism over the confirmation of England’s 19 July reopening was tempered by reports that some restrictions would need to remain in place, amidst elevated coronavirus cases in the UK.
What’s coming up?Top of the agenda today will no doubt be the publication of the US consumer price index.
June’s CPI figures are forecast to report a modest slowing of inflation, which could weigh on the US dollar this afternoon.
On the other hand, US inflation has regularly overshot expectations this year, with another stronger-than-expected reading potentially propelling USD exchange rates higher.
In the meantime, the euro could struggle today after Germany’s own CPI release confirmed inflation in the Eurozone’s largest economy slowed last month.
In the absence of any notable data releases, the pound could struggle to find momentum today, particularly as coronavirus cases in the UK remain elevated.
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)