Euro loses election gains, pound hits 6 month high vs. US dollar

The pound managed to strike new multi-month highs against the US, Australian, New Zealand and Canadian dollars yesterday without the backing of any positive UK developments.

The pound managed to strike new multi-month highs against the US, Australian, New Zealand and Canadian dollars yesterday without the backing of any positive UK developments.

The ECB rate decision helped GBP/EUR achieve highs of €1.1885, dissatisfaction with Trump pushed GBP/USD all the way to $1.2914, and further Canadian dollar losses meant GBP/CAD was able to surge to a new best level of C$1.7633. Meanwhile, GBP/AUD climbed another cent to AU$1.7326 as GBP/NZD achieved NZ$1.8815 – its strongest rate since July last year.

A seriously worse-than-expected US durable goods orders report didn’t help the situation and GBP/USD skipped merrily to a six-month high.

Yesterday’s European Central Bank (ECB) meeting left the euro struggling, with President Mario Draghi seeming keen to quash speculation that there are any plans to adjust monetary policy at this juncture.

Although he acknowledged that the Eurozone’s economic outlook is a little brighter, he also asserted that ‘a very substantial degree of monetary accommodation’ is still necessary in order to give inflation a leg up.

With the euro falling in the wake of Draghi’s comments, the pound was able to creep its way up to its best levels since the results of the first round of the French general election were announced.

While Draghi was responsible for the euro’s losses, it was President Trump causing reduced demand for the US dollar. Concerns that his hotly-anticipated tax plan was actually a bit of a flop saw USD exchange rates slide. A seriously worse-than-expected US durable goods orders report didn’t help the situation and GBP/USD skipped merrily to a six-month high.

Persistent weakness in the commodity currencies also worked in the pound’s favour, allowing the British currency to advance to some of its best levels since the EU referendum.

News that the GfK survey of consumer confidence softened from -6 to -7 in April failed to take the wind out of the pound’s sales on Friday.

Wise Money market data coming up

The UK and US GDP reports are some of the key highlights on the economic calendar today. If US growth slows to the extent forecast in the first quarter (from 2.1% to 1.0%) GBP/USD could be headed for even dizzier heights.

The Eurozone is also set to publish inflation figures for April. In light of Draghi’s comments yesterday, slowing inflation is liable to send the euro lower. Conversely, if non-core inflation increases to 1.8% from 1.5% as anticipated the euro could bounce back before the weekend.

Looking ahead to next week and the biggest economic movers of GBP exchange rates will be the UK’s services, construction and manufacturing PMIs for April. Indications that economic output is slowing would put the pound under pressure as campaigning for the UK snap election intensifies.

 

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