There was speculation that underlying strength in the housing market would lead to a more aggressive Bank of England monetary policy within the next few months and with global risk appetite also holding firm, the UK currency has been able to stabilise despite underlying caution.
From lows near 1.4110 against the Dollar, Sterling recovered strongly to around 1.4180 at yesterday's European close while against the Euro found support close to 1.1610.
Prime Minister Boris Johnson also reiterated that there was nothing in the data which indicated that the planned June 21st easing of restrictions wouldn’t go ahead. This helped underpin further positive sentiment, although there were still calls for a delay. Sterling is currently settling near 1.4160 against the Dollar and at 1.1615 against the Euro.
The dollar continued to gain some respite with the Euro retreating to lows at 1.2165. The US currency was underpinned by speculation that the Federal Reserve could eventually shift towards a less aggressive policy. The very high level of liquidity will tend to undermine the US currency in the short term, especially while yields remain very low. Overall, the dollar was unable to hold its best levels.
The Federal Reserve Beige book reported that the economy had grown somewhat faster than in the previous period and that overall price pressures had increased. Production costs had increased rapidly with gradual increases in selling prices amid further supply-chain difficulties. There were also expectations that prices would continue to increase over the next few months. The report maintained concerns over inflation developments, but the dollar struggled to gain more than marginal relief.
The Euro trims intraday losses while bouncing from a daily low of 1.2200 against the Dollar prior to Thursday’s European trading session. The currency pair stays down for the third consecutive day as the US Dollar consolidates weekly losses amid a quiet overnight session.
Furthermore, ECB President Christine Lagarde’s rejection of tapering chatters couldn’t convince markets amid rising inflation data with downbeat German Retail Sales marking its first contraction in three months.
As of writing, the Euro currently trades around the 1.2185 mark against its US counterpart.
Data to watch
13:15 - USD - ADP Non-Farm Employment Change
13:10 - USD - Unemployment Claims
15:00 - USD - ISM Services PMI
16:00 - USD - Crude Oil Inventories
17:00 - GBP - BOE Gov Bailey Speaks
Posted in Daily Market News on Jun 3 2021