Sterling Vulnerable As COVID Cases Rise
The on-going strength of housing data maintained speculation that the Bank of England would have to shift to a less accommodative policy within the next few months which helped underpin Sterling, especially with expectations that the Federal Reserve and ECB would maintain very loose policies.
The UK currency was still hampered by reservations over the Delta coronavirus variant, although the impact was lessened by the on-going vaccination programme which should lessen the risk of serious illness, especially with new cases tending to be concentrated in young people.
Overall, Sterling posted net gains with the Euro testing support below the 1.1630 level while against the Dollar trading below the 1.42 mark.
The Dollar was unable to secure further traction ahead of the US open with the Euro edging higher after finding support just below the 1.2150 level. Overall market activity was relatively subdued as the new trading week began, following the monthly US jobs data.
There were underlying expectations that the Fed would maintain a very accommodative monetary policy in the short term which would also tend to undermine dollar support. There was, however, also an element of caution ahead of important events on Thursday with the latest US consumer prices data. The US employment trends index strengthened to 107.4 for May from a revised 104.3.
The Euro marks the first daily drop in three as it edges lower around 1.2180 against the Dollar, heading into Tuesday’s European session. Receding fears of inflation and ongoing rumours over the Fed’s next moves, coupled with covid headlines, exert downside pressure on the major currency pair ahead of important data coming out from the Eurozone and Germany.
Data to watch
10.00 EUR – ZEW Economic Sentiment