Pound Buoyed by BoE Rate Expectations
The Pound (GBP) was well supported at the end of last week as the currency continued to receive tailwinds from hawkish comments from Bank of England (BoE) policymaker Gertjan Vlieghe on Thursday.
Reinforcing this upside was business secretary Kwasi Kwarteng’s suggestion that there is nothing so far to suggest that the government may need to delay the next stage of lockdown easing in England.
Sterling’s momentum and weakness in USD carried the Pound US Dollar exchange rate to a three-year high at the start of this week
Looking ahead, the release of May’s finalised manufacturing PMI looks unlikely to offer support to the Pound this morning. Despite indicating record growth in factory activity, the reading missed forecast of 66.1 and came in at 65.6.
Euro Undermined by USD Strength
The Euro (EUR) ticked lower on Friday as the single currency was weighed down by its negative correlation with the US Dollar (USD), which ended the week on a positive note.
However, this drop in the Euro was tempered somewhat by data showing that economic sentiment in the Eurozone climbed to a three-year high this month.
In focus for EUR investors this morning will be the Eurozone’s consumer price index as the Euro looks to recover.
The data showed a higher-than-expected 2% acceleration of inflation last month, but the European Central Bank’s (ECB) current dovish bias could limit any upside in the Euro.
US Dollar Rallies amid Surge in Inflation
The US Dollar (USD) fluctuated at the end of last week’s session, with the currency being underpinned by some robust US economic data, before being dented by optimism over Joe Biden’s budget proposal.
USD investors appeared to be particularly impressed by the latest PCE price index as the Federal Reserve’s preferred measure of inflation printed above expectations in April.
Coming up, the latest ISM manufacturing PMI is likely to provide a boost to the US Dollar later this afternoon as economists forecast the US factory sector will have enjoyed another month of bumper growth in May.
Canadian Dollar Flat as Oil Holds Steady
The Canadian Dollar (CAD) was mostly rangebound at the end of last week’s session, with the commodity-linked currency struggling to find any strong directional bias as oil prices stalled.
In the spotlight today we have Canada’s first quarter GDP figures, with an expected acceleration of growth likely to reflect positively on the ‘Loonie’.
Australian Dollar Stumbles Following RBA Meeting
After briefly spiking, the Australian Dollar (AUD) ticked lower overnight on Monday after the Reserve Bank of Australia (RBA) made it very clear that its current ultra-accommodative monetary policy will remain in place until at least 2024.
Looking ahead, we could see the Australian Dollar remain on the defensive later this evening as economists forecast Australia’s latest GDP reading will report a slowing of growth in the first quarter of 2021.
New Zealand Dollar Steady in Risk-On Trade
The New Zealand Dollar (NZD) traded sideways overnight on Monday, with the ‘Kiwi’ able to consolidate some of its recent gains amid a prevailing risk-on mood.
Data Releases
09:00 EUR Manufacturing PMI (May)
09:30 GBP Manufacturing PMI (May)
10:00 EUR Inflation Rate (May)
13:30 CAD GDP (Q1)
15:00 USD ISM Manufacturing PMI (May)
02:30 AUD GDP (Q1)