Pound above 1.42 against the Dollar
The Pound held its own throughout Friday but following the New York market open the gains were surrendered with lows below 1.4150 to the Dollar following the US inflation data. As the market drew to a close Sterling gained support to test the 1.4200 mark against the Dollar and the Euro settled near 1.1630. Markets continued to ponder whether the full relaxation of lockdown would go ahead on June 21st. Futures market data showed an increase in bets on Sterling rising, the highest level for 11 weeks.
With the UK market closed yesterday for the Spring Bank holiday Sterling failed to make headway, but did retest the 1.4200 mark versus a weaker Dollar. In the small hours the Pound pushed higher to breach 1.4250 to the Dollar, before a slight correction, and the Euro traded close to 1.1640. Nationwide house prices underpinned Sterling with another strong print and Bank of England Deputy Governor Ben Broadbent warned that demand could outstrip supply, leading to increased inflation. Sterling opens around 1.4220 to the Dollar this morning, and 1.1635 to the Euro.
The US core PCE prices index increased 0.7% for April after a 0.4% increase the previous month and above consensus forecasts of 0.6%. The year-on-year rate strengthened sharply to 3.1% from 1.9% and above expectations of 2.9%. This was the highest annual increase since August 1992.
The dollar posted gains following the higher than expected inflation reading, but the Euro recovered ground into the London fix amid some evidence of month-end buying. Overall, the Dollar settled just below the 1.2200 level at the New York close as underlying US currency sentiment remained negative.
The Euro remains sidelined around 1.2230 against the Dollar during the first trading day of June as we begin the European session. The currency pair fails to cheer the US Dollar weakness amid cautious sentiment ahead of the key European and US data due for release today.
Data to watch
08:55 – EUR – German Final Manufacturing PMI
15:00 – USD – ISM Manufacturing PMI
16:00 – GBP – BOE Gov Bailey Speaks
19:00 – USD – FOMC Member Brainard Speaks
All Day – All Currencies – OPEC-JMMC Meetings