Pound Undermined by Delay to Ending Restrictions

Pound (GBP) Dented by Lockdown Lifting Delay

The Pound (GBP) had a mixed day yesterday, falling to a fresh one-month low against the US Dollar and slipping against the Euro as the UK’s decision to delay lockdown lifting began to weigh on the Pound.

Concerns over the reopening delay offset the publication of an upbeat jobs report, which revealed another drop in unemployment and a sharp jump in wage growth in April.

Looking ahead, the latest CPI from the UK could boost Sterling as the day goes on, with inflation surging by 2.1% in May, beating market forecasts of 1.8%.

Euro (EUR) Buoyed by Stock Markets Spree

The Euro (EUR) climbed yesterday, as the European stock markets posted their eighth day of gains, the longest winning streak since April 2019.

The Stoxx 600 has climbed by 15% so far this year, boosted by the EU’s accelerating vaccine rollout and the European Central Bank’s (ECB) continued bond-buying under the pandemic emergency purchase programme (PEPP).

Today could see EUR exchange rates dip slightly ahead of the US Reserve Bank’s interest rate decision, as investors may be cautious to place bets in anticipation of any hawkish comments from the Fed.

US Dollar (USD) Steady ahead of Fed Decision

The US Dollar found support yesterday morning before trading in a narrow range for the rest of the day, amid a subdued mood ahead of the Fed’s policy announcement.

USD investors will be eagerly awaiting the Fed’s interest rate decision this evening, looking for any signs that the bank may start to consider tapering its bond purchases.

The ‘Greenback’ may also have been capped by disappointing retail sales figures for last month, which showed a 1.3% contraction in sales last month versus the 0.8% fall that was forecast.

With the Fed decision looming, it’s possible that the US Dollar could continue to trade sideways as investors hold back for any hints of a new approach to policy.

Canadian Dollar (CAD) Dips despite Rising Oil Prices

The Canadian Dollar (CAD) slipped through yesterday’s session, despite WTI crude climbing to over $72 a barrel – its highest price since October 2018.

Canada’s inflation rate figures later today may bolster CAD somewhat, but with all eyes on the Fed decision the ‘Loonie’ may struggle to make any significant gains.

Australian Dollar (AUD) Unfazed by Weak Data

The Australian Dollar (AUD) trended higher overnight, despite the Westpac leading index showing a 0.06% decline, falling short of market expectations of a 0.3% increase.

The ‘Aussie’ may be put under some pressure as the day goes on, with China’s industrial production and retail sales figures printing below expectations this morning.

New Zealand Dollar (NZD) Gains on Rising Commodities

The New Zealand Dollar (NZD) also ticked higher in overnight trade, buoyed by rising commodities prices.

Samuel Birnie

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