Sterling Boosted By Solid Risk Conditions
The Pound traded lower against the Dollar yesterday morning and the dip below 1.4100 encouraged further selling. Reservations surrounding the Delta covid variant’s spread within the UK led to doubts that restrictions in England would be lifted as well as unease over trade friction with the EU, all combined to make a headwind for the Pound.
Solid risk conditions gave some protection to Sterling and after finding support below 1.4100 Sterling climbed back to around 1.4170 against the Dollar while the Euro traded just below 1.1630. Sterling also benefited from expectations that the Federal Reserve and ECB would maintain loose monetary policies over the medium term (not hiking rates yet).
This morning UK GDP data showed an increase of 2.3% for April, roughly in line with forecasts, but the industrial production data was weaker than expected. The Pound opened around 1.4180 to the Dollar with the Euro close to 1.1630.
US consumer prices increased 0.6% for May, above consensus forecasts of 0.4% with the year-on-year rate increasing to 5.0% from 4.2%. Above expectations of 4.7% and one of the highest readings recorded since september 2008. There was also a strong increase in used vehicle prices for the month with a further strong increase in transport services prices.
The Dollar briefly strengthened on the data, but gains reversed quickly as yields failed to respond.
The US dollar remained on the defensive on Friday as yields remained low with the Euro edging higher against the Dollar at 1.2190.
The Euro locked in some gains overnight against the Dollar with the pair opening quite flat as we begin the last trading session of the week.
The Euro moved slightly higher after the ECB left its cash rates unchanged, despite the higher economic projections with ECB President Christine Lagarde reaffirming the central banks committed to its bond purchasing program even at a higher rate than the previous one.
As of writing, the Euro currently trades around the 1.2185 mark against its US counterpart.
Data to watch
09:30 – GBP – BOE Gov Bailey Speaks
15:00 – USD – Prelim UoM Consumer Sentiment