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Services data knocks the Pound

GBP - British Pound

The shift in risk appetite continues as local data disappoints in the US, Europe and the UK, and as Asia soaks up the renewed war of words between US-China after local holidays. Sterling fell early against the US dollar after services PMI data saw its largest fall since the survey began back in 1996. The figure was far from the expansion figure 50, coming in at 13.4 which is why Sterling jolted lower to 1.2435 from 1.2474 at 9:30 yesterday morning. A recovery in the currency pair was seen prior to the US non-manufacturing PMI, which also saw a slump from expansion, but the figure was nowhere as bad – 41.8 seen versus 37.5 forecast. The US dollar has continued to peg the pound back as investors once again place their money back into less riskier assets such as the US dollar. China, which had been on a long holiday, re-opened and saw their investors look at the US-China spat with fresh eyes. The Euro lost ground against Sterling yesterday after news from Germany's highest court gave the ECB three months to justify purchases under its bond-buying programme or lose the Bundesbank as a participant. A scheme aimed at cushioning the economic blow from the Coronavirus, is still expected to be approved, but the uncertainty has spooked investors and the impact saw a selloff in the Euro. This along with news that corporate profits across Europe are sliding further only guided GBP/EUR to a session high of 1.1500.

No economic data is expected from the UK today, so updates from Europe and the US will offer direction on Sterling movement. The EU continues to give an economic forecast and the US is due to offer the latest non-farm employment change. The latter normally giving a gauge on the high impact releases, unemployment claims and unemployment rate, both of which are due to be released before the end of the week.

Key Movers

The Japanese Yen has scaled to a three-year high against the Euro and advanced to a seven-week peak on the US dollar. The risk-off appetite from investors has only helped the safe haven JPY advance, as an alternative to the world’s number one currency the US dollar. As US president Donald Trump continues to press China about the origins of the Coronavirus outbreak, sparking renewed concerns of a further trade war, JPY/USD has moved up to 106.21. The concerns surrounding the ECB justifying the bond-buying programme has meant that JPY/EUR has advanced to 114.81 and as global economies look to ease their lockdown restrictions, investor interest in the JPY may continue.

Expected Ranges

GBP/USD: 1.2330 - 1.2470 ▼

GBP/EUR: 1.1420 - 1.1530 ▲

GBP/AUD: 1.9200 - 1.9370 ▼

GBP/NZD: 2.0380 - 2.0570 ▼

GBP/CAD: 1.7350 - 1.7490 ▼