Daily Currency Update

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Brexit negotiations come back into focus for Sterling

GBP - British Pound

Brexit negotiations, or lack of them, began to take focus in the UK again as Sterling slid over the course of last week. The Pound fell 2.37% versus the Greenback, and 2.28% versus the Euro last week as key deadlines are only weeks away, but disagreements continue between the UK and the EU over provisions on financial services that can be included in the future trade agreement. EU’s Barnier added that he’s 'determined but not optimistic' that there will be an agreement, adding that the UK is stepping up preparations for no deal and Sterling ended up being one of the worst performing currencies over the course of last week.

This week sees focus in the UK on employment and consumer spending data, both expected to be horrendous. After UK GDP last Wednesday was reported at a poor -2%, the focus will be on how poorly the economy is performing from Covid related activity.

Key Movers

European markets rose in early trading last Friday, as optimism spread throughout Europe over the easing of lockdowns. The FTSE100, Stoxx 600 and Frankfurts Xetra Dax all rose as signs of normality begin to creep back into EU economies and the Euro has benefited as a result. EUR/USD remains buoyant above the 1.08 region while GBPEUR has slid to its lowest level in 3 weeks.

Italy announced that it would allow free movement within the country from June 3rd barring specific local restrictions. Germany is loosening quarantine restrictions for travellers arriving from EU, Schengen Area and UK. The Baltics launched a travel bubble that would allow citizens and residents of Lithuania, Latvia and Estonia to travel freely within the region.

Eurozone GDP numbers were also in line and not worse than expected with GDP contracting -3.8% in the first quarter and Germany has reported that it has fallen into recession after its economy shrank at its fastest pace since the last financial crisis. The European powerhouse also revised down its 4th quarter GDP figure, but it was France that reported the worst GDP figure of -5.8%.

For years, Trump had been an advocate of a weaker dollar to gain an economic advantage for US exporters. However, he is now saying it would be a “great time” to have a strong dollar and the USD continues to strengthen, even as US economic data disappoints.

This week will be interesting, Prime Minister Boris Johnson reopens the UK economy while trying to control the rate of new infections. On the other side of the ocean, Fed Chairman Jerome Powell will testify alongside Treasury Secretary Steven Mnuchin on the quarterly CARES Act report to the Senate Banking Committee. It will be interesting to see if the GBP/USD pair continues to fall from the last week’s close around the 1.2100 level.

Expected Ranges

GBP/EUR: 1.1140 - 1.1250 ▼

GBP/USD: 1.2070 - 1.2150 ▼

GBP/AUD: 1.8610 - 1.8930 ▼

GBP/CAD: 1.6820 - 1.7110 ▼

GBP/NZD: 2.0230 - 2.0450 ▼

EUR/USD: 1.0760 - 1.0850 ▲