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Sterling Holds Despite Four Week Delay

Sterling Holds Despite Four Week Delay

GBP

Sterling ebbed lower yesterday morning in disappointment that the English lockdown restriction easing would be delayed for four weeks. Expectations that the UK economic recovery would continue prevented the worst of any potential fallout. The Pound found support below 1.4100 to the Dollar and crept back above the level on Dollar weakness. The Euro found support close to 1.1670 before pushing back to near 1.1641.

Andrew Bailey, the Bank of England Governor stated that managing the bond-buying (asset purchase) programme would be a major challenge, but there was no mention of monetary policy ahead of next week’s policy announcement. Around 6pm Boris Johnson spoiled teatime with confirmation that lockdown easing planned for June 21st would be delayed until July 19th. The currency markets had already priced in the move given that the announcement had been flagged strongly in advance.

The UK government has announced that the first draft of a free trade deal with Australia had been signed. UK unemployment edged lower to 4.7% from 4.8% and payrolls increased more than forecast for the month. 

Sterling opens higher this morning at 1.4125 to the Dollar and 1.1650 to the Euro.

 

USD

There was a significant element of caution ahead of Wednesday’s Federal Reserve policy decision, but also expectations that the central bank would be extremely slow in removing policy stimulus which limited the potential for sustained US currency support.

The dollar was unable to make headway on Tuesday ahead of the latest retail sales data due later in the day and was trading at around 1.2125 early against the Euro.

 

EUR

The Euro continues moving within a narrow range above the 1.2120 mark against the Dollar, consolidating the recent recovery from monthly lows ahead of the key US consumer data.

Optimism around upbeat Eurozone data was offset by a slew of dovish central bank speak with policymakers echoing it was too early to talk about the end of the Pandemic Emergency Purchase Programme (PEPP).

Later today, a further round of additional ECB speak ahead with all eyes on Wednesday’s FOMC meeting and Fed Chair Jerome Powell’s press conference for the next direction.

 

Data to watch

13:15 – GBP – BOE Gov Bailey Speaks 

13:30 – USD – Core Retail Sales

13:30 – USD – PPI

13:30 – USD – Retail Sales

13:30 – USD – Core PPI

14:15 – USD – Industrial Production 

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