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USD falls as risk appetite improves

GBP - British Pound

Sterling experienced a relatively choppy end to last week's trading but has begun the week on the front foot.

Friday trading started with GBP/USD and GBP/EUR holding around 1.2350 and 1.1460 handles respectively, before spending much of the day falling to lows of 1.2303 and 1.1405. The Office for National Statistics announced the largest ever fall in UK Retail sales of -5.1% in March, despite panic buying boosting food stores 10%.

Around the same time UK health Minister, Matt Hancock stated it is still too soon to change lockdown measures and could not give any further details on an exit strategy, denting sterling’s chances of a staging a recovery.

Saying that, a mixed bag of positive data from the US helped risk appetite improve through north American trading hours, thus leading to gains for both GBP and the Euro. The headline news of US durable goods orders came in at minus 14.1%, but orders excluding transportation only posted a fall of -0.2%. A short while after, the Michigan Consumer Sentiment index reported a jump from 68 to 71.8, completely going against market expectations and leading many economists to believe 1st quarter GDP should come in better than expected. The problem, however, is how will those numbers stack up in April and through the 2nd quarter of the year.

Looking ahead to this week, everyone will be keeping watch for news that the UK could ease restrictions to the current lockdown, but given recent UK minister's comments and the fact we still are very much in the eye of the coronavirus storm, it is more likely to be the end of next week when any details are released.

As such economic data prints could prove to be more effective in moving markets this week. With no headline news coming from the UK, it will be up to US advanced quarterly GBP and the Federal Open markets committee press conference on Tuesday, and the ECB press conference on Wednesday. These will give a good insight into the two central banks thinking around the current situation.

Key Movers

The Euro enjoyed gains through much of Friday and early trading this week as improved risk appetite and news that both Spain and Italy, the worst affected European countries, have started to ease lockdown restrictions. On top of the relatively positive US data from Friday, risk appetite was further improved as the ECB decided to lend more openly against junk collateral to support Financial markets. This saw EUR/USD move from interbank lows of 1.0728 to highs or 1.0855.

At the moment, it is very much a risk-on / risk-off sentiment amongst the markets and while most major currencies posted gains against USD on Friday, the safe haven dollar still remains higher overall and will likely stay this way in the coming weeks

Looking ahead, all eyes will be on the FOMC and ECB press conferences as well as US quarterly GDP. Chinese Manufacturing PMI and US unemployment claims.

Expected Ranges

GBP/USD: 1.2375 -- 1.2525 ▲

GBP/EUR: 1.1420 - 1.1520 ▲

GBP/AUD: 1.9175 - 1.9150 ▲

GBP/NZD: 2.04 - 2.06 ▲

GBP/CAD: 1.74 - 1.76 ▲