Pound Strengthens on UK Reopening Hopes

Pound (GBP) Firms on UK Reopening 

The Pound (GBP) firmed against many of its major rivals yesterday as the UK is on track to lift most of the remaining lockdown restrictions in two weeks’ time.

However, the upside was capped by concerns that lifting restrictions amid a surge in cases could lead to the virus mutating into new, more dangerous variants. 

With no notable data releases due from the UK today, domestic news headlines could drive most movement in GBP exchange rates. 

Euro (EUR) Flat on Coronavirus Fears 

The Euro (EUR) traded mostly sideways yesterday, as rising cases of coronavirus offset some positive services PMIs coming out of Europe. 

Germany’s PMI came in slightly below expectations at 57.5 but was still significantly higher than the previous month’s figure of 52.8. Meanwhile, the Eurozone’s PMI printed just above forecasts at 58.3, its highest figure in almost 14 years. Despite this, the Euro was unable to make any meaningful gains. 

The Euro could face further headwinds today. This morning’s factory orders from Germany unexpectedly contracted by 3.7%, and Germany’s upcoming ZEW economic sentiment index is forecast to fall. Unless the figure beats expectations, this could weigh heavily on EUR. 

US Dollar (USD) Dips ahead of Fed Meeting Minutes 

The US Dollar (USD) lost ground yesterday, amid lower US Treasury yields and worries ahead of the minutes for June’s Federal Open Market Committee (FOMC) meeting. 

Analysts are wary that the minutes may strike a less hawkish note than was signalled by the Federal Reserve’s change in tone last month, and this may have weighed on the ‘Greenback’. 

Independence Day also added to USD’s downside, with US markets closed yesterday for the public holiday and creating thin trading conditions in the US Dollar. 

USD investors will be looking to the ISM non-manufacturing PMI later today for fresh impetus. 

Canadian Dollar (CAD) Climbs after OPEC+ Delays Decision on Increasing Oil Production 

The Canadian Dollar (CAD) dipped and then rebounded yesterday after the OPEC+ meeting on plans to to increase oil production was delayed once again. 

This sent oil prices soaring, with WTI crude hitting $76.32 a barrel by the evening, which boosted the commodity-linked ‘Loonie’. 

With WTI crude now trading at around $76.90 a barrel, CAD could make further gains today, provided oil prices continue to stay strong. 

Australian Dollar (AUD) Strengthens on RBA Update 

The Australian Dollar (AUD) climbed overnight, making gains ahead of and following the Reserve Bank of Australia’s (RBA) latest interest rate decision. 

While the RBA left rates unchanged, it announced that it will begin to taper its quantitative easing programme from September in response to Australia’s stronger-than-expected economic recovery, which propelled the ‘Aussie’ upwards.  

New Zealand Dollar (NZD) Firms on Rate Hike Expectations 

The New Zealand Dollar (NZD) also gained in overnight trade, following a sharp increase in business confidence for the second quarter of this year. 

This in turn has raised expectations that the Reserve Bank of New Zealand (RBNZ) will hike rates earlier than anticipated, further boosting the ‘Kiwi’.