Pound Euro Rallies on Reopening Optimism, USD Strengthens

Pound Firms Following Boris Johnson’s Comments

The Pound (GBP) rallied against the majority of its peers yesterday following upbeat remarks from Boris Johnson regarding the potential reopening of the rest of the UK economy later this month.

While the PM said that the government will need some more time to make a decision, he suggested that there is currently ‘nothing in the data at the moment that means we cannot go ahead with step four’.

Coming up, we may see the Pound extend its gains as the reopening of more of the UK economy in mid-May resulted in last month’s finalised services PMI revised higher to a 24-year high. 

The jump in service sector activity has pushed the Pound Euro exchange rate higher to firm at €1.16

Euro Slumps on Lacklustre German Data

The Euro (EUR) was placed on the defensive through yesterday’s trading session in response to Germany’s disappointing retail sales figures.

April’s figures reported a whopping -5.5% slump in sales growth, down from a healthy 7.7% expansion in March and much worse than the 2% contraction which had been predicted by economists.

Looking ahead, there may be a chance for the Euro to recoup some ground during today’s session as the Eurozone’s latest services PMI came in slightly higher than expected and recorded its strongest growth since 2018.

US Dollar Bolstered by Rising Treasury Yields

The US Dollar (USD) struck higher during yesterday’s trading session, with the currency attracting investors amidst a rise in US Treasury yields.

USD exchange rates added to their gains after Philadelphia Fed President Patrick Harker said it is time to ‘think about thinking about’ tapering, which suggests the Federal Reserve could move toward tightening its monetary policy.

In the spotlight today will be the latest ISM non-manufacturing PMI, which could send the US Dollar higher if US service sector activity continued to rise in May.

Canadian Dollar Supported by Rising Crude Prices

The Canadian Dollar (CAD) remained resilient on Wednesday, with the oil-sensitive ‘Loonie’ continuing to find support as OPEC signalling of gradual lifting of production curbs continued to lend strength to WTI crude prices.

Australian Dollar Slips on Economic Data Misses

The Australian Dollar (AUD) came under pressure overnight as the US Dollar rebounded, Australia’s finalised May services PMI missed forecasts and was downwardly revised, and retail sales growth slowed.

Australia’s trade data for April also weighed on the ‘Aussie’. Figures showed a widened trade surplus, but this was caused by an unexpected slump in imports.

New Zealand Dollar Weakens after China Services PMI Dip

The New Zealand Dollar (NZD) also trended lower overnight as China’s May Caixin services PMI fell and came in below forecast. Combined with weak Australian data and USD strengthening, NZD exchange rates fell.

Data Releases

09:00 EUR Services PMI (May)

09:30 GBP Services PMI (May)

13:15 USD ADP Employment Growth (May)

13:30 USD Initial Jobless Claims (29/May)

15:00 USD ISM Non-Manufacturing PMI (May)

Matthew Andrews

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