Today's Currency Market Focus
- GBP: The Irish question haunts Sterling
- EUR: Back to flavour of the month
- USD: G7 Summit weighs on the Dollars
GBP: The Irish question haunts Sterling
Sterling touched 1-months lows against the Euro yesterday on Brexit concerns.
One major issue remains unresolved – the Irish border. The UK government wants to avoid a hard border (a wall?) but rumours are Theresa May is struggling (as always) to get her own cabinet to agree on the matter.
Beyond Brexit, this week has seen some encouraging signs for the UK economy, in particular the widely watched PMI survey of the Services sector. The hope is the first quarter dip in growth was temporary.
Option markets are keeping the dream alive; pricing in a 60% chance of a rate rise in September. But let’s face it, that’s not far off the flip of a coin.
Today we have the 12-month inflation forecast due out. Buyers of Sterling will be hoping there’s no downward revision.
EUR: Back to flavour of the month
The Italians may have caused some mayhem and the economic data may be soft, but that hasn’t stopped the Euro staging a comeback.
The reason for the lift has come from unexpected quarters: the normally timid European Central Bank (ECB).
The ECB is due to have its monthly policy meeting next week and the main point of discussion will be whether to end bond purchases later this year. This was confirmed yesterday by the ECB’s chief economist, Peter Praet.
Despite the bullish noises from the ECB, the data in the EU continues to disappoint. A case in point was the negative reading on German factory orders yesterday. But when it comes to currencies, central banks beat economics (in the short-term anyway).
USD: G7 Summit weighs on the Dollar
The bond markets have been playing a leading role in Dollar moves lately. This has largely been having a positive effect on the Dollar as US Treasury yields have been climbing on expectations of higher inflation/growth.
But yesterday the trend went into reverse with US Treasury yields falling sharply, taking the wind out of the Dollar. Traders are putting it down to a drop in risk appetite, as tensions are rising between the US and its major trade partners ahead of the G7 summit this weekend.
Thanks For Reading, What Next?
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Geoff Lambourne - Direct Dial me on 0044 (0)1872 487 470.
Current rates:
Friday 8th June 2018 at 11:00
£1.00 GBP = 1.1400 EURO
£1.00 GBP = 1.3414 USD
£1.00 GBP = 1.7719 AUD
£1.00 GBP = 1.9113 NZD
£1.00 GBP = 1.7462 CAD
£1.00 GBP = 17.6984 ZAR
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