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Sterling opens the week higher

Monday 4 April, 2022

Daily Currency Update

Final manufacturing PMI was the only data of note from the UK on Friday and the release came in under expectations. Manufacturers indicated that ongoing supply shortages, greater caution among clients, escalating inflationary pressures, and geopolitical tensions had all hampered the upturn. Following the early release, Sterling saw steady gain until around midday against both the EUR and USD. The currency pairs saw session lows around 2/3pm in the afternoon, with GBP/USD dropping to 1.3090 and GBP/EUR 1.1860. Sterling started this week on the front foot against both the EUR and USD. This is partly supported by Eurozone consumer inflation hitting a record high on Friday, and a mixed bag of labor data from the US indicating that unemployment fell but non-farm employment change and ISM manufacturing PMI both came in under predicted figures. Sterling has little macroeconomic data to take direction from in the UK this week, so eyes will likely be on the latest Russia-Ukraine headlines as well as data elsewhere.

Key Movers

European governments are now thinking of new sanctions on Russia after Ukrainian and other European officials accused Russian forces of war crimes. Germany's defence minister said on Sunday that the European Union must discuss banning imports of Russian gas, a step that could have severe economic ramifications on European growth given the reliance of several Eurozone countries, including Germany, on Russia for energy supplies. The news has seen the EUR lose ground against both the GBP and USD, with GBP/EUR touching 1.1900 in the past hours and EUR/USD falling to 1.1025. European producer price data for February is due later today and is expected to show an annual rise of 27%, putting further pressure on the European Central Bank to raise interest rates after data last week showed Eurozone consumer inflation hitting a fresh record high of 7.5% in March. This is ahead of this week’s ECB minutes of its March meeting, which are due for release on Thursday, and will be studied carefully ahead of the upcoming meeting on April 14. This could keep the EUR under pressure this week.

Expected Ranges

  • GBP/USD: 1.3090 - 1.3160 ▲
  • GBP/EUR: 1.1830 - 1.1950 ▲
  • GBP/AUD: 1.7410 - 1.7570 ▼
  • EUR/USD: 1.0980 - 1.1075 ▼