Daily Currency Update

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Where next for the Euro?

GBP - British Pound

The UK becomes the latest economic powerhouse to break negative data records as monthly retail sales, manufacturing PMI and services PMI came out far worse than expected. Manufacturing PMI came in at 32.9, Services PMI at 12.3 and Retail sales with the record-breaking figure of -5.1%. Much like the US and Eurozone, the UK numbers will grab headlines and it is unlikely this will boost foreign investment sentiment, which has already been eroded since the beginning of Brexit. The pound hardly moved as a response to the weak data, highlighting that the UK drop in output and productivity aligns fairly closely with the other hurt nations and expert forecasts. Pound traders will be itching to once again ride sterling’s wave up past $1.30, which may be sooner than expected. It seems certain sectors are striving for normality as Geoff Barton (Head of ASCL) claimed that schools may re-open as soon as 1st June, however we’d have to see a serious drop off in both injection and death rate before this situation is even considered.

Key Movers

The USD remained fairly muted on Thursday as traders sit on their hands, waiting for further escalations in the oil sector. Due to its safe haven status, the unknown is positive for the USD as it extends its weekly gains against all commodity currencies, including NOK, AUD, NZD and CAD. The Dollar also surged against the Euro after the one-trillion-euro-plus stimulus package was spoken about however not agreed upon. The small print has been left to next week, which obviously, doesn’t send shockwaves of positivity through the Eurozone population. Italy, Spain and France are all keen to use grants to fund the zones economic recovery, however others are convinced loan issuance is the correct method. It is expected the stimulus package will be fully operational by 1st June, however, as is the case of a bloc that size, the distribution of wealth is expected to be complex and administration costs expected to be high. If run efficiently and effectively, the Euro may be able to breathe some fresh air, at least until Brexit negotiations are back underway. On the flip side, if the stimulus package fails to aid those most affected, it could get very ugly, very quickly for the Euro. With Italy and Germany in an economic rut pre-pandemic, it is likely they will suffer the most on the transition out. The next few months are likely to bring with it political, economic and civil tension across the bloc.

Expected Ranges

GBP/USD: 1.2280-1.2450 ▲

GBP/EUR: 1.1380-1.1560 ▲

GBP/AUD: 1.9330-1.9615 ▼