|
|
|
Money Transfer
Currency Market Update: British Pound Falters, Euro Wobbles, and U.S. Dollar Steadies Ahead of Key Data
The British Pound continues to struggle, failing to build momentum despite modest gains in recent trading. Market sentiment remains cautious, with many investors convinced that the Bank of England (BoE) may soon accelerate its rate-cutting cycle. As the UK data calendar stays light for now, all eyes are on the upcoming Bank of England Monetary Policy Report Hearings scheduled for tomorrow, followed by the release of critical GDP figures on Friday. Both events are expected to shape the BoE’s direction and could lead to further volatility for the Pound.
Meanwhile, the Euro faced challenges during yesterday’s session, wobbling due to a lack of new economic data across the European Union. The single currency has lost over 2% against the U.S. Dollar since hitting a multi-year peak in late September. With the European Central Bank (ECB) expected to announce another rate decision next week, traders are in a wait-and-see mode. The economic calendar remains quiet until then, but the market is keeping a close watch on the ECB’s policy direction as it navigates the bloc’s economic landscape.
The U.S. Dollar remained relatively stable in Asian trading, holding near a seven-week high reached earlier this week. Traders are eagerly awaiting the release of the Federal Reserve’s September meeting minutes, expected later today. These minutes will provide deeper insights into the Fed’s decision to cut rates by 50 basis points and may hint at the central bank’s future plans. Additionally, this week’s inflation data will likely play a key role in shaping the Fed’s economic outlook, influencing investor sentiment in the coming days.
As the currency market looks ahead to pivotal data and central bank actions, traders and investors are bracing for potential shifts in the forex landscape. Keep an eye on these developments as they unfold throughout the week.
Currency Market Update: British Pound Hits 29-Month High, Euro Struggles, and U.S. Dollar Gains Interest
The British Pound (GBP) has rallied to a 29-month high against the Euro, bolstered by expectations that the Bank of England’s (BoE) approach to easing monetary policy will be more measured compared to other G7 central banks. The prevailing sentiment is that the BoE will only cut interest rates one more time by 25 basis points before the year ends, providing a strong foundation for the pound’s continued growth. This slow and steady approach to policy adjustment has helped the GBP maintain its strength in the face of global economic uncertainty.
Meanwhile, the Euro (EUR) has been struggling to gain traction. Investors have taken a cautious approach, holding back on placing significant bets ahead of today’s release of Eurozone inflation data. The report is expected to reveal that inflation in the Eurozone fell below the European Central Bank’s (ECB) 2% target for September. If the inflation data is softer than expected, it will likely reinforce market expectations of a 25-basis-point rate cut at the ECB’s next policy meeting in October.
Across the Atlantic, the U.S. Dollar (USD) has been showing renewed strength following a more hawkish tone from Federal Reserve Chair Jerome Powell. During a speech, Powell indicated that he anticipates two additional 25-basis-point rate cuts this year, assuming the economy continues to perform as expected. Investors quickly reacted, adjusting their expectations and reducing bets on more aggressive easing by the Fed. This shift in sentiment has sparked interest in the USD, further stabilizing its position in the global market.
Overall, the currency market remains dynamic as central banks across major economies continue to navigate their monetary policies amidst evolving economic conditions. Keep an eye on upcoming data releases and policy meetings, as these will play a crucial role in shaping the direction of the GBP, EUR, and USD in the months ahead.
Currency Market Update: British Pound, Euro, and U.S. Dollar Performance
The global currency market continues to reflect the economic conditions of major economies, with the British Pound, Euro, and U.S. Dollar all showing movement based on recent data releases and central bank actions.
British Pound Holds Steady Despite Mixed UK Services PMI
The British Pound remained relatively subdued during yesterday’s trading session following the release of the UK’s services PMI. While the growth in the UK’s key services sector was more modest than expected, the index still pointed to underlying strength. This helped limit the Pound’s losses, as the data suggested moderate growth overall, offering some stability to the currency in the face of economic uncertainty.
Euro Struggles as German Business Activity Contracts
The Euro faced additional losses yesterday after data revealed a significant contraction in German business activity. The September figures showed that business activity in Europe’s largest economy declined at its sharpest pace in seven months, raising concerns that Germany may have slipped into recession. The growing signs of economic weakness could increase the likelihood of another rate cut by the European Central Bank (ECB) in October, which would put further pressure on the Euro.
U.S. Dollar Rebounds After Fed Rate Cut
The U.S. Dollar has bounced back somewhat after the Federal Reserve’s significant rate cut last week, as investors appear less concerned about the risk of a U.S. recession. While the Fed’s easing cycle initially caused a selloff, investor sentiment has improved, and market participants are now pricing in 75 basis points of further rate cuts by the end of the year, with nearly 200 basis points in cuts anticipated by December 2025. This outlook has helped the Dollar recover, signaling a more optimistic view of the U.S. economy moving forward.
As global economic data continues to unfold, the currency market remains highly sensitive to shifts in growth, central bank actions, and investor sentiment. With the British Pound showing resilience, the Euro facing headwinds, and the U.S. Dollar in recovery mode, traders and businesses alike will be watching these developments closely to gauge future currency movements.
Currency Market Update: British Pound, Euro, and U.S. Dollar Movement
In a dynamic global market, currencies are always on the move, and recent developments have put the British Pound, Euro, and U.S. Dollar in the spotlight.
British Pound Edges Up as Investors Await BoE Decision
The British Pound saw a slight rise during yesterday’s session as anticipation builds ahead of Thursday’s Bank of England (BoE) policy meeting. After a 25-basis point (bp) reduction in August, the BoE is expected to maintain its key interest rate at 5%. This decision could mark a pause in the easing cycle as investors closely monitor the central bank’s stance on inflation and economic growth. In the absence of significant UK economic data, the Pound’s movement may remain linked to broader market sentiment, with all eyes on Thursday’s rate decision.
Euro Consolidates Following ECB Rate Cut
The Euro seems to be consolidating its recent gains after last week’s European Central Bank (ECB) rate cut. ECB President Christine Lagarde recently cooled expectations for another rate cut in the near future. She emphasized that the central bank will make decisions on a meeting-by-meeting basis, without pre-commitments, leaving the door open for adjustments depending on future economic data. This cautious approach is aimed at balancing inflation control while supporting economic recovery across the Eurozone.
U.S. Dollar Under Pressure as Rate Cut Looms
The U.S. Dollar faced downward pressure as expectations build for the Federal Reserve to cut interest rates by 50 basis points at tomorrow’s meeting. Investor sentiment is strongly pointing towards an easing cycle, with a 68% probability of a 50 bp cut and a 32% chance of a smaller 25 bp cut. The Federal Reserve’s anticipated rate cuts could accumulate to 100 basis points by the year’s end, as the central bank responds to signs of a slowing U.S. economy.
Looking Ahead: Market Sentiment and Central Bank Policies
As investors await key policy decisions from the Bank of England, European Central Bank, and Federal Reserve, the direction of major currencies like the British Pound, Euro, and U.S. Dollar will remain closely tied to central bank actions and market sentiment. With no major UK data releases expected before Thursday, the Pound’s performance may hinge on market speculation surrounding the BoE’s rate path. Similarly, the Euro and U.S. Dollar will be influenced by the evolving stance of their respective central banks as they navigate an uncertain global economic landscape.
Stay tuned as we follow these key events shaping the currency markets.
Market Update: Sterling, Euro, and U.S. Dollar Performance in Focus
Yesterday, the British Pound traded without a clear directional bias, largely due to the absence of any significant UK economic data releases. This left the Pound vulnerable to prevailing negative risk sentiment throughout the day. However, today’s session started on a more promising note with the release of the UK’s latest jobs report. The data revealed a further decrease in unemployment for July, which helped offset concerns over a slowdown in wage growth during the same period. This balancing act between lower unemployment and softer wage increases has provided some stability for Sterling.
Meanwhile, the Euro experienced slight losses, primarily driven by its inverse relationship with the U.S. Dollar. Investors in the Eurozone remain cautious ahead of the European Central Bank’s (ECB) interest rate decision, expected later this week. In the background, confirmation that German inflation slowed significantly last month has added downward pressure on the Euro, acting as a potential headwind in today’s session.
Over in the U.S., the Dollar inched higher as traders look ahead to critical inflation data set to be released on Wednesday. Expectations are that the report will show a continued cooling of inflation through August, a development that could shape the Federal Reserve’s upcoming interest rate decision. With the Fed widely expected to cut rates by 25 basis points next week, this inflation reading will be a key factor in guiding market sentiment.
Stay tuned as these key events unfold, which are likely to impact the market in the days ahead, particularly with central bank decisions looming in both the Eurozone and the U.S.
Sterling Gains Momentum Despite Budget Warning
The British Pound showed a notable increase in value during yesterday’s trading session. Despite a cautionary note from Prime Minister Keir Starmer that the government’s Autumn Budget would be “painful,” investors remained largely undeterred. The Pound’s recent upward movement appears to be bolstered by comments from Bank of England (BoE) Governor Andrew Bailey, who has tempered expectations for imminent interest rate cuts. With limited UK economic data available, the Pound is likely to maintain its positive trajectory as long as investor sentiment continues to adjust their rate cut forecasts.
Eurozone Woes as German Economy Falters
In contrast, the Euro experienced a subdued trading session following the release of Germany’s finalized GDP figures for the second quarter, along with the latest GFK consumer confidence index. Although the lackluster performance was anticipated, it has reignited concerns about the health of the Eurozone’s largest economy. As a result, EUR exchange rates have remained relatively flat, reflecting the ongoing apprehension about the Eurozone’s economic outlook.
U.S. Dollar Gains Amid Geopolitical Tensions
The U.S. Dollar saw modest gains yesterday, driven by increased safe haven demand amid escalating geopolitical tensions in the Middle East, Libya, and Ukraine. However, the Dollar’s gains were somewhat capped as investors remain focused on potential U.S. interest rate cuts. Federal Reserve Chair Jerome Powell’s recent Jackson Hole speech, which signaled the likelihood of such cuts, continues to shape market expectations.
Overall, while the British Pound benefits from easing rate cut expectations, the Euro faces challenges from weak economic indicators, and the U.S. Dollar’s advance is tempered by ongoing rate cut speculation.
Sunny start to the month for Sterling
Good Morning, with sunny weather week ahead, UK slowly returns to normality, the currency markets continued to worry last week about the impact of this on inflation and whether Central Banks will be too tardy in their response.
The Royal Bank of New Zealand and the Bank of Canada signaled their intentions to raise rates in 2022, as Dr. Gertjan Vlieghle, a Bank of England’s Monetary Policy Committee member, voiced his concerns. His comments helped sterling spike back towards $1.4200, the top of its recent range, even though his remarks were heavily caveated, However, with the markets shut for holidays yesterday, Friday became the de facto month-end, and rebalancing unsettled the dollar, and it has continued to weaken this morning.
As customary for the first week of the month, the data docket is dominated by the unemployment reports released throughout the week culminating in the all-encompassing non-farm payroll employment report on Friday. The euro has opened at $1.2220 this morning. The Eurozone releases its inflation data ahead of the European Central Bank’s next meeting on 10th June with the central bank prevaricating over their next steps.
UK
Last week, the pound put in a good performance against most of its peers, and this looks set to continue with its opening at €1.1640 this morning. It responded as we said earlier, to the comments from the Bank of England whilst ignoring the political fallout from Dominic Cumming’s testimony about the handling of Covid. London is gradually returning to work, and the comments from Andrew Bailey and his colleagues to the Treasury Select Committee of the House of Commons, on Thursday, will be followed closely for any signs of hawkishness as will his speech this evening. Apart from the testimonies, it is another quiet week for data in the UK apart from the final readings of the Purchasing Manager’s Indexes starting today with those from the Manufacturing sector and followed on Wednesday with Services
Euro
As with all economies, markets are studying inflation and employment data for clues to recoveries and subsequent tightening of rates. This week, it’s the turn of the Eurozone to publish their reports, starting today with the release of its Core and Headline Inflation data for May. After yesterday’s Consumer Price Index releases across the continent, these may surprise the upside. We will also be keeping an eye on German Unemployment data released as this hits your mailbox. The response from European Central Bankers is limited as they enter into a week-long verbal blackout from Thursday before their next council meeting on 10th June. Also released this week, the European Markit Purchasing Managers Indexes start today with their Manufacturing and followed with the other sectors during the week. Tomorrow sees German Retail Sales for April reported as well as April’s Eurozone Producer Price Index. Also released is a report concerning the euro’s international role, which should show the growing use of the single currency on the international stage and may add a little strength to the single currency.
US
After Personal Consumption Expenditure came in slightly higher than expected at 3.1% on Friday, there was some selling of US Bonds, exacerbated by the reports of President Biden unveiling a $6tln budget, leading to higher yields and making the dollar more attractive. It will be interesting to watch how the market trends this week ahead of the key non-farm payroll data released this coming Friday. The 266,000 jobs created in April disappointed the market the last time the figures were reported. This data set will be closely studied for anomalies as there seems to be demand for workers, with supply that is the problem. Before the Non-Farm data, ADP will release their private-sector employment report tomorrow, not always the most reliable indicator, and the weekly Jobless claims on Thursday. Apart from the unemployment data, the ISM business surveys are also out. A busy schedule of speakers from The Federal Reserve awaits us.
Scandi
The Swedish krona was pretty much rangebound against the euro, and there were no major movements despite data showing that wages increased by 0.1% on a month-on-month basis. Today we will get the Swedbank PMI Manufacturing data and, later in the week, the Current Account Balance and the Budget Balance. Most traders and market participants expect the delayed krona bull run to make steam this month after May turned out to be one of the least volatile months ever with movements within a 10 öre range against the euro and pretty much a 5 öre range against Sterling.
The Norwegian krone weakened throughout May, and its impressive bull run has been somewhat halted despite rumours about a potential rate hike come September. This week we will get the DNB PMI Manufacturing data followed by the Current Account Balance figure on Wednesday.
We would like to encourage our clients and partners trading with any of the Scandinavian or Nordic countries to start preparing for the month-long summer holiday starting after Midsummer. Should you wish to speak to one of our regional experts about how flows over the summer could be managed most effectively, reach out to your Account Manager or reply to this email directly.
Is inflation rearing its head?
Good Morning, in an upbeat end to the holiday-shortened week saw sterling (inflation) gain against the dollar above $1.4025, where it has opened this morning.
Several factors helped the pound rally; firstly, the Bank of England presented very upbeat forecasts for both the economy and the level of unemployment as the UK continues to ease successfully out of lockdown. Secondly, the Conservative party performed better than expected in the local elections. Thirdly the dollar fell quite sharply after Friday’s employment data was much worse than expected. Against the euro, the pound traded in a narrow range as the gyrations in the dollar market caused technical adjustments to pricing, and it has opened this morning virtually unchanged at €1.1550.
Over the weekend, election results continued to be announced including, those for both Scotland and London. As expected, London was held by the Labour party, but with a weaker endorsement than previously, and in Scotland, the SNP just failed to capture a majority, but this will not stop them from pushing for a second independence referendum. However, with Boris Johnson holding a strengthened mandate South of the border, he is likely to play hardball over the independence referendum. This week the market will be watching as tensions increase over the post-Brexit trade deal, which flared up into a confrontation over fishing off the shores of Jersey last week. Looking forward, we expect the market to carry on digesting last week’s events before the release of Gross Domestic Product in the UK on Wednesday. There is also a full data docket in the US to look forward to, including inflation as measured by the Consumer Price Index (CPI), which will be keenly watched as a sharp rise is predicted by some analysts.
GBP
After the excitement of the local elections, fishing disputes, and the Bank of England’s meeting last week, it looks like we have a slightly calmer time ahead. The only data of any real import being the announcement of both the Gross Domestic Product (GDP) for the first quarter. As the country has been able to return to its favourite occupation of shopping since lockdown partially ended, expectations are for a good figure. We will also watch the vaccination figures as we approach a further milestone on the roadmap to exiting lockdown the reopening of indoor entertainment next Monday, which will give the economy an additional boost. Alongside the GDP figure released on Wednesday, the latest Manufacturing and Industrial Production data will also be announced. Finally, the Bank of England could expand on last week’s economic forecasts when Governor Andrew Bailey speaks both tomorrow afternoon and Thursday evening. Increasingly his words will be studied for any sign of tightening as pent-up demand hits the economy causing fears of inflation to increase.
Euro
The euro has been performing well against the dollar and has opened this morning at $1.2150 against the greenback. Much of this gain came Friday afternoon after the Non-Farm payroll number in the US led to heavy selling of the dollar. Helping the euro strengthen is the feeling that Europe has now turned a corner in its fight against Coronavirus. Hopefully, it will be able to salvage its summer vacation period and, in doing so, revive its decimated service sector. It’s an extremely quiet week for data up ahead in Europe, and the US data releases will drive the direction of the euro against both the dollar and sterling. There is very little on the data docket this week, and much of Europe will be closed on Thursday for the Ascension Day Holiday. We will keep an eye out for the ZEW surveys on economic sentiment in Germany due tomorrow and its Consumer Price Index on Wednesday, but these rarely move the euro.
US
The Non-Farm Payroll numbers released last Friday were much lower than the consensus expected and resulted in an immediate and continued sell-off in the dollar as the US’s recovery miracle was called into doubt. In addition, the employment data supported the Federal Reserve’s policy of leaving rates lower for longer, encouraging the risk-on mood that took hold Friday afternoon. The dollar’s movements are likely to dominate the currency markets with a US-centric data-heavy week ahead. There are no major data releases due until Wednesday when April’s Consumer Price Index (CPI) is released, which is expected to show a jump to nearly 4% in the inflation rate, which will pressure the Federal Reserve to tighten policy. After the CPI data, it will be interesting how well received the issuance of $41bn 10-year Treasury notes is at the afternoon’s auction. On Thursday, the weekly jobless number is released, and on Friday, April’s Retail Sales and Industrial Production are published.
Scandi
The Swedish krona finished the week off on a strong note against most G10 currencies gaining more than 1% against the EUR on Friday. It was mainly buoyed by the poor non-farm figures rather than any Swedish-related macro data. Monday begins with the Housing Price Indicator for April, and Wednesday will see the latest CPI figure. The latter is expected to come in at 2.2%, 0.2% above the Riksbank’s target, and the first time in more than two years, it has reached these levels.
The Norwegian krone was mainly rangebound throughout most of last week with no significant data releases. Today the latest CPI figures are released and are expected to come in at 3.1%. Norges Bank has a target of 2%, which would further Governor Olsen’s case for a rate hike come September, we will also watch the GDP figures released on Wednesday.
Have a great week.
Synergy Team
Spring is in the air at last
Good Morning All, the first signs that an economic recovery is underway in the UK were seen on busy high streets and roads last week and in figures released by the Office for National Statistics (ONS).
According to this report, CHAPS data showed that spending had rebounded to 91% of the pre-pandemic level and footfall in shops was at 75% of its 2019 level. Hopefully, these figures will continue to grow, and the release of the pent-up demand that the Bank of England has been touting turns into reality. Europe also seems to have turned a corner with its vaccination rate increasing steadily, and whilst still lagging both the UK and the US, it now looks better placed to achieve its targets. The markets remained relatively quiet, taking the good news in their stride, and over the week, sterling held steady against the dollar and has opened at just above $1.3900. The euro rebounded strongly against both sterling and the dollar as traders reappraised their pessimistic positions, and this pushed sterling down below €1.1500 for the time being.
We have a busy week ahead as the month draws to a close with plenty of data to digest and, most significantly, the monthly meeting of the US central bank, The Federal Reserve. After a week of mixed but mostly upbeat economic data, more of the same is expected. However, with new Covid cases in India topping 300,000 daily, fears of another outbreak remain both here and in Europe. The daily vaccination rate will continue to have a marked effect on currencies, especially the pound, due to the UK’s strong links to the Indian sub-continent. The pound may also suffer some political wobbles with domestic elections looming, which could see the SNP increase its share of the vote in Scotland, leading to pressure for another referendum, at the same time as allegations of sleaze continue to surface. As usual, there will be month-end pressures to contend with, exasperated again by a long weekend in the UK.
UK
Sterling was driven as much by technical factors last week as it was by the economic data that was released and, as it is so often, was buffeted by the shift in international demand for the dollar. Being a “Beta” currency, it rose and fell in tandem with US yields and stock markets and eventually settled unchanged on the week, having failed to break above $1.4000. The released data was generally supportive of sterling, good PMIs, strong retail sales, inflation rising, and unemployment creeping lower, reinforcing expectations of a solid recovery in the country. The data docket in the week ahead is empty, and no speakers are scheduled from the Bank of England; however, Ben Broadbent did give a bullish appraisal of the economy at the weekend. With no data for traders to get their teeth into, we expect the pound to be driven by outside forces, especially in the latter part of the week, after the meeting of the US Federal Reserve and month-end rebalancing starts to come into play.
Euro
The euro put in a good performance last week and ended over a cent up against the dollar and a eurocent stronger against sterling. Confidence is returning, as shown by the Purchasing Manager’s reports that were released on Friday. This will be boosted by the increase in vaccination rates and the further good news that the Karlsruhe constitutional court didn’t stand in the way of the ratification of the EU fiscal stimulus plan. We have a raft of economic data ahead of us this week, and seemingly every member of the ECB is also speaking, starting with ECB Chief Economist Richard Lane today followed by its President Christine Lagarde on Wednesday. This morning, the IFO business climate readings for Germany are released. On Wednesday, consumer confidence data for France and Germany are issued, with a continuation of the positive numbers of last week expected. The Eurozone sentiment and confidence data are released on Thursday, as is the Consumer Price Index (CPI) for Germany. We close the week with potentially market-moving data with Eurozone CPI, Unemployment, and Gross Domestic Product on Friday.
US
The monthly meeting, on Wednesday, of the US Federal Reserve Open Market Committee (FOMC) will dominate the market’s thoughts in the week ahead. Despite the US economy rebounding strongly and unemployment falling, the Fed is unlikely to change its accommodative monetary policy just yet. However, the press conference after the meeting will be listened to for any hints on future policy changes. Ahead of the Fed meeting, sales of US Durable Goods are reported today, and we then have a lull on the data docket until the regular weekly jobless update and the US GDP figure for the first quarter are released on Thursday. The week closes with a frantic Friday when Personal Income, Spending, and consumption data are released. The highlight on the speaker front will be Federal Reserve Chairman Jerome Powell’s press conference on Wednesday after the FOMC. President Joe Biden is also scheduled to speak at a joint session of Congress when he is expected to expand his controversial plans to raise taxes.
Scandi
The Swedish krona was very much rangebound throughout most of last week, and the lack of macro data did not offer any help for participants hoping for more volatility. This week is far more action-packed, with the Riksbank setting interest rates on Tuesday. Inflation has been creeping up lately, but the Riksbank is not expected to increase rates, and many believe that the 0% rate will remain in place for the foreseeable future. The press conference with Riksbank Governor Ingves will be more exciting and one we will monitor closely. The PPI figures and the Unemployment Rate are released at the same time at 08:30. On Wednesday, we will get a health check on the Swedish retail sector, and on Thursday, we will study the latest Economic Tendency Survey.
Over across the fjords in neighbouring Norway, the Norwegian Krone suffered the same lackluster week as its big brother. This week does not see any important data being released apart from the Unemployment Rate, which is out on Friday. It is expected to have changed ever so slightly, coming down from 4.2% to 4.1%, which may benefit the incumbent government seeking re-election later in the year.
Have a great week.
Synergy Team