Euro holding election gains, pound recovers losses against US dollar

The euro started the week strongly, but the same couldn’t be said for the pound.

The euro started the week strongly, but the same couldn’t be said for the pound.

After spending most of last week holding multi-month highs, Sterling dropped against the euro and put on a mixed performance against several of the other major currencies.

GBP/EUR brushed a low of €1.1771 and closed the day at €1.1757, GBP/USD fell to $1.2775 before bouncing back above $1.28, GBP/AUD fluctuated between AU$1.6885 and AU$1.6993 while GBP/NZD managed to climb from NZ$1.8185 to NZ$1.8408.

While the pound fell by over 1% against a rallying euro, the British currency was able to claw back some of its losses against the US dollar as Federal Reserve rate hike expectations remain deflated.

The euro was Monday’s currency winner, recording (and holding) notable gains against the majors thanks to the outcome of Sunday’s first round of voting in the French election.

With one of the anti-EU candidates, left-wing Jean-Luc Melenchon, out of the running, the odds of a ‘Frexit’ were reduced, and demand for the common currency surged.

Although far-right Marine Le Pen made it through to the second round, recent polls see her commanding just over 30% of the final vote – with centrist Emmanuel Macron taking more than 60%.

In a surprising move, Le Pen has temporarily stepped down as leader of the National Front in hopes that campaigning ‘above partisan considerations’ will encourage supporters of the defeated candidates to back her when it’s time to return to the polls.

While the pound fell by over 1% against a rallying euro, the British currency was able to claw back some of its losses against the US dollar as Federal Reserve rate hike expectations remain deflated following President Donald Trump’s recent comments about preferring a low interest rate policy.

The only UK data of the day revealed that the post-referendum depreciation in the pound meant that factories experienced the best three month period for exports for more than six years between February and April. Less positively, plans for investment have fallen dramatically in response to continued uncertainty about the UK’s future trading relationship with the EU.

Wise Money market data coming up

UK public borrowing figures could have an impact on the pound in the hours ahead, but other than those numbers the only potentially currency-moving data on the calendar for today is the US consumer confidence report for April.

Although sentiment is believed to have fallen, if the gauge comes in at 122.5 (as expected) it will still be above the historical average.

The GBP/AUD exchange rate is likely to experience volatility overnight as RBA Governor Philip Lowe delivers a speech and Australia publishes inflation data for the first quarter.

If Lowe hints that concerns about the domestic housing and labour market could warrant a change in monetary policy, we could see significant movement from the Australian dollar.

The next UK news of note – consumer confidence figures and domestic growth data for the first quarter – isn’t due for release until Friday so in the meantime political developments and external events are likely to be the main cause of GBP fluctuations.

 

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