Looking ahead at this week’s dataset and UK Retail Sales are likely to rebound from last month’s poor result, and US Leading Indicators are predicted to show a slight sign of improvement.
Foreign Currency Market Update – GBP / USD Update
Sterling took a steep but short-lived step downwards this morning as the Bank of England released the Minutes to their policy meeting for June. The MPC voted 5-4 against expanding the asset purchasing target which marked a vast change in sentiment from last month when only one member put forward the case for further quantitative easing measures. Considering that Consumer Price inflation fell from 3.0% to 2.8% in May it now seems increasingly likely that the BoE will look to boost their QE scheme next month. GBP/USD dropped by as much as two-thirds of a cent immediately following the announcement, but investors proceeded to neutralise the knee-jerk reaction and cable returned to the level at which it opened trading as markets wait for the Fed’s own quantitative easing programme results later this evening.
The Pound to US Dollar exchange rate fluctuated within a tight one cent range between 1.5460 and 1.5570 for the majority of last week’s trading sessions until Sterling sprung into life and posted gains of almost 2-cents on Friday afternoon. A release stating that Manufacturing Production in the UK fell by 0.3% in April sent the Pound lower on Monday, but a subsequent set of data showing that both Producer Prices and Consumer Prices performed worse than expected in May allowed Sterling to claw back its losses. Despite the announcement of a widening of the UK Trade Balance from -£8,500 billion to -£10,103 billion in April, Sterling grew by around 2-cents on Friday afternoon to 1.5738 as investors saw the BoE’s cheap lending programme as a positive influence on the UK economy. The increased liquidity measures may have helped boost the Pound’s status as a safe-haven from the Eurozone debt crisis, and the pivotal Greek vote that took place over the weekend was surely a market-moving influence in Sterling’s end-of-week ascent.
Looking ahead at this week’s dataset and UK Retail Sales are likely to rebound from last month’s poor result, and US Leading Indicators are predicted to show a slight sign of improvement, however the primary event risk for the GBP/USD pair comes in the form of the Federal Open Market Committee’s rate and stimulus decisions released later today. A standoffish approach from the Fed would be highly supportive of the Buck and would most likely lead to a strong US Dollar rally. Whereas any additional stimulus measures would harm the US Dollar with the extent of the damage directly correlating to the severity of the stimulus increment. The most likely outcome is a slightly subdued response from the Fed in which the proceeds from short-term Treasury sales go towards the purchase of longer-dated paper. Under this circumstance the Pound could post gains and challenge rates in the region of 1.5800-1.6000.
Summary of major upcoming data releases that we think may move the market.
- The downward spike for GBP CAD was short-lived due to disappointing US Non-Farm Payrolls data
- Pound Sterling, the Euro and US Dollar exchange rate news – The Pound weakened against the majors yesterday morning
- Pound Sterling, the Euro and US Dollar exchange rate News Flash – The Pound received a timely boost this morning
- Sterling Euro US Dollar NEWS FLASH – The Pound has rallied strongly against the majors this morning
- Pound Sterling, the Euro and US Dollar exchange rate news flash – The Pound weakened back towards 1.5950 against the U.S Dollar this morning