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 off to a slow start so far this week, with GBP/EUR muted at €1.1622 and GBP/USD subdued at $1.4136. GBP/AUD has slipped to AU$1.8258, while GBP/CAD and GBP/NZD hold steady at C$1.7094 and NZ$1.9620 respectively.
Looking ahead, will a dovish European Central Bank (ECB) send the euro lower this week?
What’s been happening?The US dollar took a dive at the end of last week’s session, following the publication of the latest non-farm payroll figures.
While US employment growth rose from 278,000 to 558,000 in May, this was short of consensus estimates for a rise of 650,000 and was the second consecutive month in which payrolls missed expectations, triggering a sharp drop in USD exchange rates.
This pullback in the US dollar allowed the euro to accelerate on Friday as a result of the negative correlation between the pairing, allowing the single currency to quickly rebound after a weaker-than-expected Eurozone retail sales print.
Finally, after initially climbing at the start of European trade, the pound found itself on the defensive by the end of Friday’s session, amidst ongoing concerns that the spread of the Delta variant of the coronavirus could disrupt the government’s roadmap out of lockdown.
What’s coming up?Turning to this week, the main catalyst of movement during the session is likely to be the ECB’s latest policy meeting.
The bank is widely expecting to leave interest rates on hold this month, with the euro potentially dipping if policymakers signal that the bank is still a long way from tapering its Pandemic emergency purchase programme (PEPP).
For GBP investors the focus will remain on UK coronavirus developments, with Sterling vulnerable to losses after Health Secretary Matt Hancock said the government is ‘open’ to delaying the next stage of lockdown easing.
In the meantime, the US dollar looks to gain ground in the wake of comments from Treasury Secretary Janet Yellen, in which she suggested that higher interest rates would be a ‘plus’ for the US economy.
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)