Pound wavers amid light data calendar
The pound began last week’s session on an upbeat note, following the Confederation of British Industry’s (CBI) latest retail data. The CBI’s distributive trades index indicated improving retail sales volumes, lifting Sterling.
Despite pushback against interest rate cuts from Bank of England (BoE) policymaker Catherine Mann, Sterling stumbled on Tuesday. Data releases began to dry out, leaving GBP exposed to shifting risk appetite.
Subdued movement continued into midweek trade for GBP, as a lack of economic data limited the pound’s appeal.
Risk-on trade allowed the pound to shrug off confirmation of a recession on Thursday. The final reading of 2023’s fourth quarter GDP data confirmed that the UK economy had contracted, but weakness amongst other currencies negated this.
Market closures in observance of the Easter holidays on Friday saw Sterling end the week on a quiet note.
This week, the pound is set to see very little in the way of impactful data releases. However, confirmation of slowing service sector activity could soften Sterling against its peers on Thursday.
US Dollar supported by forecast-beating data releases
Profit taking saw the US dollar open last week’s trade on the defensive. The previous surges in USD exchange rates saw investors cash-in, but an uptick in US Treasury bond yields helped to temper these losses.
While positive trading conditions weakened the ‘Greenback’ at the beginning of Tuesday’s session, it was able to recover. Durable goods orders recovered by 1.4% in February, notably above forecasts, boosting the US dollar.
Choppy trade affected USD in the middle of the week, due to a lack of economic data. This left the safe-haven currency at the mercy of a cautiously optimistic market mood, which prompted it to edge lower against its riskier peers.
The end of the week’s session saw USD fluctuate, as bullish trade served to undermine the safe currency.
However, this was offset by a forecast-beating ISM manufacturing PMI, which catapulted the ‘Greenback’ on Monday.
Various US labour market releases are due to print over the course of the week. With the impactful JOLTs job openings data and non farm payrolls releases both expected to show cooling employment, USD may weaken.
Euro pressured by tepid German data
Weakness in the US dollar allowed the euro to begin last week on a positive note. As the pairing shares a negative correlation, EUR managed to gain support although its gains were limited by risk-on trade.
Mixed German data then prompted the euro to waver through Tuesday’s session. While consumer confidence ticked upward in April, the overall mood remained deeply pessimistic amongst households.
Interest rate cut speculation then blighted the euro in midweek trade. Dovish comments from European Central Bank (ECB) policymaker Piero Cipollone weighed on EUR. Cipollone suggested monetary policy would remain restrictive, even if the ECB were to cut rates.
Thursday then saw the common currency struggle for support, amid an unexpected slump in German retail sales. In February, sales dropped by 1.9% on a monthly basis, further amplifying concerns over the German economic outlook.
Looking ahead, the euro could see volatile trade over the course of this week upon the release of the latest EUR inflation data. The Eurozone’s headline consumer price index is forecast to have held at 2.6% in March, which could trim ECB rate cut bets and boost EUR.