Daily Currency Update

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Sterling recovers following talk of easing lockdown restrictions

GBP - British Pound

Sterling remained under pressure through Friday trading after the Bank of England announced its intent to increase its bond-buying program by £100 billion. The news saw GBP/USD fall bellow the 1.24 handle before finding support around 1.2335 following the announcement that UK retail sales numbers, for May, came in at +12%, much higher than the +6.3% expected.

The news, in line with Bank of England chief economist Andy Haldane's comments the previous day, highlights the recovery in UK demand and output is occurring sooner and materially faster than had been expected. Overnight Asia pacific trading has now seen sterling gain back most of its losses due to the weekend government announcement that the 2m social distancing measure review will be brought forward.

If we therefore continue to see improvements in UK data and if the UK avoids a second wave following the easing of social distancing measures, the reopening of shops and now even pubs / bars, the great British pound could rise in the longer term.

UK data is relatively thin on the ground this week so focus will turn to US and Euro area PMI's tomorrow plus Thursday’s US Jobless claims, durable goods orders and annualised GDP numbers. All will have a knock on effect to global risk sentiment.

Key Movers

Euro dollar pretty much mirrored cables moves through Friday and early Monday trading. The pair fell initially following Friday’s lacklustre US current account numbers but has since picked up through overnight Asia pacific trading, as improvements in risk appetite continue to bolster currency flows away from the safe haven USD.

GBP/EUR continues to hover between 1.1050 and 1.11 as both currencies remain affected by second wave COVID and Brexit trade negotiation fears.
Across the world The Australian Dollar enjoyed a day of two halves, first capitalising on risk-on flows early on Friday before reversing course during the American session.

As mentioned above, market attention will be on US and European data releases this week.

Expected Ranges

GBP/USD: 1.2335 - 1.2475 ▲

GBP/EUR: 1.1035 - 1.1140 ▲

GBP/AUD: 1.7950 - 1.81 ▲

GBP/NZD: 1.9150 - 1.93 ▲

GBP/CAD: 1.6775 - 1.69 ▲