Pound Undermined by Coronavirus Concerns, US Dollar Rally Cut Short by Underwhelming Payroll Figures

GBP/EUR Exchange Rate: Pound Rocked by Coronavirus Fears 

The Pound to Euro (GBP/EUR) exchange rate has traded in a wide range over the past week, amidst growing concern over the UK’s coronavirus situation. 

Sterling sentiment was able to climb through the second half of last week, after Boris Johnson said that there is currently ‘nothing in the data at the moment that means we cannot go ahead with step four’. 

However, with cases of the Delta variant more than doubling in the first week of June, and Health Secretary Matt Hancock suggesting that the government is ‘open’ to delaying the 21 June reopening date, the Pound has struggled to attract support this week. 

Looking ahead, it’s safe to assume that coronavirus developments will continue to dominate GBP exchange rates, with any confirmation that the next phase of lockdown easing will be delayed likely to send the Pound sharply lower. 

GBP/USD Exchange Rate: Sterling Undermined by Brexit Uncertainty 

After briefly slumping to a two-week low, the GBP/USD exchange rate was able to bounce back at the very end of last week’s session, mostly as a result of a pullback in the US Dollar. 

This week has then seen the pairing fluctuate with the Pound’s initial attempts to rally being scuppered by renewed Brexit friction between the UK and EU over the Northern Ireland protocol, with the EU threatening retaliatory measures if the UK does not abide by its ‘international law obligations’. 

However, Sterling sentiment has subsequently been revived by comments from Bank of England (BoE) Chief Economist Andy Haldane, in which he suggested that the bank needs to start tapering its stimulus programme. 

The publication of the UK’s latest monthly GDP release could lend some additional support to the GBP/USD exchange rate later this week, if UK economic growth in April impresses. 

USD/GBP Exchange Rate: US Dollar Knocked by Payroll Miss 

The USD/GBP exchange rate looked to be on track to close last week’s session on a high following a trio of impressive US data releases on Thursday. 

However, this rally was cut short by the latest US non-farm payroll release as May’s figures printed below expectations for the second month in a row, suggesting the US recovery may not be as strong as initially thought. 

This week has so far seen the US Dollar trade in a wide range against most of its peers, amidst volatile US Treasury yields and fluctuating market sentiment. 

Looking ahead, the publication of the US consumer price index on Thursday will be the immediate focus for USD investors. Will another sharp jump in inflationary pressure in the US push the Federal Reserve to start tapering its stimulus measures?  

EUR/USD Exchange Rate: Euro Buoyed by Upgraded GDP Figures 

After struggling a little in the second half of last week’s session, the EUR/USD exchange rate has been able to sustain a modest rally so far this week. 

This uptick in the Euro is attributed to the latest Eurozone GDP estimate, after growth in the bloc was revised up from –0.6% to –0.3% in the first quarter of 2021. 

Capping these gains however has been some lacklustre economic data from Germany, with a shock contraction in industrial production in April, as well as a drop in economic sentiment in June. 

Still to come this week is European Central Bank’s (ECB) latest rate decision. No policy changes are expected from the ECB this month, but will the conclusion from the bank’s monetary policy strategy review throw up some surprises on Thursday? 

Matthew Andrews

Contact Matthew Andrews