Daily Currency Update

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Dollar ends the week on the back foot

GBP - British Pound

The pound has managed to recoup some its losses seen earlier in the week as dollar weakness continues to permeate the markets. GBP/USD traded under 1.25 for most of Tuesday and Wednesday however regained the big number Wednesday night and currently trades around the 1.2550 handle. Next week sees a slew of data from the UK with wage growth numbers, inflation data and retail sales figures due on Tuesday, Wednesday and Thursday respectively. The set of prints will give us a clearer picture as to whether the economy has ground to halt or indeed slipped into reverse for the second quarter given the Brexit uncertainty enveloping UK business's at present. The week after we get confirmation of who the next Tory leader and PM will be with the results of the Conservative Party members ballot due on the 22nd July. Boris Johnson remains firm favourite with the bookies at 1/25 to land the top job. The important bit for the pound will be what happens next? With very limited time given parliamentary recess's in the UK and the EU over August and the UK party conferences in September it seems likely the date for Brexit will be pushed back even further despite BoJo's insistence that this will not be the case. The House of Commons has to ok any departure from the EU and with most MPs stating they dont want a no-deal scenario it seems Boris will struggle to meet the Halloween deadline. It appears the pound will be a prisoner of politics for some time yet. As well as rising against the dollar, the pound has fended off a move below the key 1.1111 level against the euro which means the shared currency still cant quite get you 90p.

Key Movers

The dollar ends the week on the back foot as it seems we are all but guaranteed a 25bp rate cut from the US Federal Reserve at the end of the month. Fed Chairman, Jerome Powell gave testimony before both the Senate and the House of Representatives this week taking time to again highlight the darkening clouds encroaching on the US economy. US/China trade tensions, stubbornly low inflation (despite a tight labour market) and little pipeline pressures from wage growth mean we are likely at the start of an easing cycle from the Fed. Some market observers are predicting a "one and done" 50bp cut however a more measured series of 25bp cuts is most analysts expectation eventually knocking up to 1% off the benchmark rate over the next 12 months. Powells dovish testimony sent the greenback lower across the board and it remains under pressure as we end the week with EUR/USD at 1.1260 and USD/JPY around 108.40. With the European Central Bank also expected to loosen policy later in the year equity markets have been buoyed with the Dow Jones cracking 27k for the first time ever. The commodity currencies have also gained a boost with AUD/USD making another play for .70 and NZD/USD close to .67. Rising tensions with Iran have helped push Brent Crude above $67pb helping push USD/CAD down towards the 1.30 handle.

Expected Ranges

GBP/USD: 1.2475 - 1.2580 ▲

GBP/EUR: 1.1090 - 1.1190 ▲

GBP/AUD: 1.7860 - 1.8020 ▼

GBP/NZD: 1.8710 - 1.8875 ▼

GBP/CAD: 1.6280 - 1.6420 ▼