Pound fights back thanks to increasing oil prices
Sterling remained under pressure yesterday throughout the European trading session. The lack of economic data released yesterday meant Friday’s bearish trend continued, with GBPUSD reaching lows below 1.4350 again.
After the European close was a different story, however. Mixed results from EU referendum polls combined with increasing oil prices to strengthen the Pound against all major currencies. Cable (GBPUSD) managed to rebound to 1.4500, whilst GBPEUR returned to the 1.2800 threshold.
This morning, Sterling has maintained the levels reached overnight ahead of April’s core inflation data due for release at 9.30am. The market is expecting to see consumer prices advance 0.5% on a yearly basis, matching the 0.5% figure from March. If the data comes in as expected, Sterling should hold the gains seen against the Euro, Dollar and Yen. However, weaker data will likely cause a rebound ahead of tomorrow’s unemployment data from the UK.
Monday meant much of Europe was on holiday yesterday. The Euro ebbed by 0.3% against the Pound due to low trading volumes and no economic data releases. Dark clouds continue to surround the Euro as ratings agency Fitch stated that there could be negative implications for European credit ratings if the UK vote to leave the EU in the forthcoming referendum. The Eurozone trade balance for March is due today and early predictions are at 22.5 billion Euros, 3.5 billion Euros better than last month’s figure of 19 billion.
The US New York Empire index posted a four month low for May, coming in at -9.0 from 9.6 previously. Although not market moving data, the number will trigger fresh doubts surrounding the manufacturing outlook and forthcoming releases will be watched closely. Richmond Fed President Lacker remained hawkish over June’s interest rate decision, stating that the tightening labour market and rising inflation are reasons for a rate hike to go ahead.
The Dollar gave up Friday’s gains against the Pound, as rising oil prices weighed on the Greenback while increasing support for the UK remaining in the EU pushed Sterling higher. The pair opened Monday morning at 1.4342, with Sterling strength taking over and the pair broke through the 1.4500 level during the Asian session last night.
EURUSD consolidated above the 1.1300 level yesterday, with the Euro managing a small gain against the Dollar. The pair opened this morning at 1.1320, 0.14% higher than Monday’s open.
Data to watch: European Central Bank’s Praet speech. 9.30am UK April Consumer, Retail & Producer Price Indices all Month on Month & Year on Year, Core CPI Year on Year. 10am Euro March Trade Balance. 1.30pm US April Consumer Price Index, incl & excl food and energy & core. April Building Starts & Housing Permits, Capacity Utilization & Industrial Production.