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Pound fluctuates as eyes are on Downing Street

GBP - British Pound

Yesterday the pound fluctuated against both the US dollar and euro as investors digested the latest from the ECB and US inflation figures.

It's looking more and more likely however that the UK could remain with restrictions beyond June 21st, a move that would depress the pound and weigh on it. As outlined earlier in the week, the extent of the pound's reaction would depend on the length of those restrictions and how far reaching they were. Watch out for any update over the weekend and perhaps the Andrew Marr show could be when more details are released.

This morning did see the latest release of UK GDP figures which showed the month of April expand by 2.3%, the highest monthly increase since July 2020. Whilst impressive, this did miss expectations slightly and the UK economy is still over 3% smaller than when the pandemic began. This reminder has knocked the pound slightly.

Key Movers

Over to the ECB who yesterday kept rates on hold as expected but Christine Lagarde, the head of the ECB, did state in her press conference that the rate of asset purchasing would be stepped up in the next quarter 'at a significantly higher pace'. This move saw the Euro lose some ground yesterday and could act as a drag on the currency.

In the US inflation has hit 5% on an annualised basis following yesterday's release, a rate that far outstrips the Fed's target of 2%. The Fed have maintained that these inflation numbers are merely 'transitory' but if they continue to skyrocket then at some point the central bank may have to step into the ring and tackle them. Any increase in rates therefore could see the dollar strengthen.

Expected Ranges

GBP/USD: 1.4080 - 1.4180 ▲

GBP/EUR: 1.1575 - 1.1640 ▲

GBP/AUD: 1.8190 - 1.8300 ▲

EUR/USD: 1.2100 - 1.2220 ▲