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GBP/USD rebounds in optimistic trade

currency-newsGBP/USD rebounds in optimistic trade
The pound firmed on Monday, with the currency rebounding from its initial lows in response to an upbeat market mood.

Meanwhile, Sterling is trading sideways so far this morning, with GBP/EUR flat at €1.1625 and GBP/USD muted at $1.4160. GBP/CAD is subdued at C$1.7106, while GBP/AUD and GBP/NZD hold steady at AU$1.8269 and NZ$1.9613 respectively.

Looking ahead, will an improvement in German economic sentiment send the euro higher this morning?
 

What’s been happening?

The pound opened this week’s session on the defensive as a result of comments made by Health Secretary Matt Hancock over the weekend, in which he suggested the government is ‘open’ to delaying the next stage of lockdown easing.

However, Sterling was later able to rally on the back of the wave of optimism which swept through markets through the second half of the European session, closing higher in spite of tensions between the UK and EU ahead of talks regarding the Northern Ireland protocol.

The euro also got off to a poor start on Monday, with the single currency coming under some pressure after data showed a surprise contraction in German factory orders in April.

However, the single currency’s negative correlation with the US dollar saw it firm later in the session as USD exchange rates weakened.

This pullback in the US dollar was attributed to a prevailing risk-on mood, which reversed the ‘greenback’s initial gains, made in the wake of comments Treasury Secretary Janet Yellen as she suggested higher interest rates would be a ‘plus’ for the US.
 

What’s coming up?

Kicking off today’s session was the publication of Germany’s latest industrial production figures, with the euro facing some headwinds as factory output unexpectedly contracted in April.

Also set to influence EUR exchange rates today will be the publication of the German ZEW economic sentiment index later this morning. The release could help the euro rally as it is expected to report that the index will have continued to rise this month, having previously climbed to a 21-year high in May.

For GBP investors the focus is likely to remain on UK coronavirus developments, with any further hints that the government could delay the 21 June reopening date likely to pose a risk to the pound.

Finally, the publication of the latest JOLTs job opening figures in the US is expected to report that the number of new positions being created continued to climb in April, but will this be enough to lift the US dollar?
 
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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