US Dollar Firms Soars in Skittish Trade, Reopening Confirmation Provides Temporary Boost to the Pound

GBP/EUR Exchange Rate: Pound Briefly Strikes Two-Week High 

After fluctuating through the second half of last week’s session, in response to some conflicting messages from Bank of England (BoE) policy makers, the Pound to Euro (GBP/EUR) exchange got off to a roaring start this week. 

In fact, the pairing soared to a new two-week high, following the announcement from Boris Johnson that nearly all remaining coronavirus restrictions in England would be lifted from 19 July. 

However, the Pound was unable to sustain these gains for long, with the GBP/EUR relinquishing almost all of this week’s gains on Tuesday afternoon, amidst renewed Brexit uncertainty. 

Looking ahead, Sterling may have a chance to bound back at the end of this week’s session with the publication of the UK’s latest GDP figures. Will the reopening of more the UK economy result in a robust growth reading in May? 

GBP/USD Exchange Rate: Sterling Undermined by Brexit Tensions 

While reopening optimism extended some support to the GBP/USD exchange rate in the first half of this week, the pairing’s upside potential looks to be capped in the face of renewed Brexit jitters. 

This follows the news that European Commission Vice President, Maroš Šefčovič has warned the UK government that it faces legal action if it continues to violate the terms of last year’s Brexit agreement. 

The ongoing row over the Northern Ireland protocol is of particular concern to GBP investors, who fear the spat could sour any future trade talks pertaining to the service sector. 

Expect to see trade in the Pound remain volatile if tensions between the UK and EU continue to flare. 

USD/GBP Exchange Rate: US Dollar Rebound as Risk Appetite Sours 

The USD/GBP exchange rate traded in a wide range over the past seven days, with the US Dollar weakening on Friday, after a larger-than-expected jump in US payrolls last month was undermined by a surprise rise in US unemployment. 

The ‘Greenback’ was then left vulnerable to additional losses through the start of this week’s session, as the closure of US markets for the extended 4 July weekend, resulted in thin trading conditions in the US Dollar. 

This gave way to a sharp rebound in USD exchange rates on Tuesday however, with investors flocking to the safe-haven currency, as a selloff in equity markets soured market risk appetite. 

The spotlight this week will be on the publication of the minutes from the Federal Open Market Committee’s (FOMC) June policy meeting, with the US Dollar likely to accelerate further if they reaffirm the Federal Reserve’s new hawkish bias. 

EUR/USD Exchange Rate: Euro Sinks as German Data Disappoints 

The Euro US Dollar exchange rate fluctuated through the second half of last week, with the single currency able to take advantage of a pullback in the ‘Greenback’ thanks to a stronger-than-expected Eurozone PMI reading, which reported factory activity in the bloc struck a new record high in June.

With the bloc’s service PMI also printing above forecast on Monday, the Euro looked to be well positioned to extend this upside this week. 

However, some underwhelming German economic data, including the country’s latest industrial production figures and economic sentiment index, subsequently pulled the rug out from beneath the Euro and sent the EUR/USD exchange rate plunging to a new three-month low. 

Looking ahead, the European Central Bank (ECB) may conclude its strategic review later this week, where a potential revision to its mandate could infuse some considerable volatility into the Euro.