Daily Currency Update

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Market turns towards the Federal Reserve

GBP - British Pound

After a crazy and tumultuous Friday jobs report, the market will now turn its attention towards the Federal Reserve's meeting and statement this week. The Non-Farm Jobs report at the end of last week saw 2.5m jobs added to the US economy instead of an expected 7.5m lost which is quite a turn around. Half of these jobs were added in the restaurant and food sector as businesses rushed to open ahead of Memorial Day and all of this meant that the USD managed to halt its steady slide. The DXY (Dollar index) halted a 6 day losing streak whilst EURUSD eventually topped out at 1.1380 ending an 8 day winning streak. But what does all of this mean for the USD now and the Federal Reserve? Well, the Fed is now meeting under slightly rosier circumstances but it isn't expected to change its tone too much. If anything it entrenches the view that negative rates aren't an option or a necessity.

In the UK, Friday saw the end of the fourth round of Brexit negotiations come and go with little progress. In this writer's view there is a large risk that at any point between July and the end of the year there could be an announcement that a deal hasn't been reached and the UK will now leave the EU under a 'no deal' framework. Obviously this would spell bad news for sterling which actually finds itself on a 'triple week winner'. The rise in GBPUSD is the longest in two and a half years and its seven day advance is impressive given the uncertainty still around the impact of coronavirus on the UK economy.

Key Movers

Elsewhere this afternoon, ECB President and fiscal stimulus crusader Christine Lagarde speaks. For the EU the focus now shifts to the detail around its newly announced €750bn stimulus package with diplomats expected to begin discussing the details this week. Early today we had German industrial production figures which unsurprisingly were dire with the 70% drop in car productions standing out.

Expected Ranges

GBP/USD: 1.2650 - 1.2750 ▲

GBP/EUR: 1.1110 - 1.1260 ▲

GBP/NZD: 1.9430 - 19550 ▼

GBP/CAD: 1.6880 - 1.7060 ▼