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Pound impacted by potential freedom day delay

GBP - British Pound

Sterling starts the week under some pressure, due to market speculation that the UK government could postpone 'Freedom day' on the 21st of June. This final stage in the path out of lockdown was to see all restrictions lifted, but the government has been under pressure from scientists over the last two weeks to delay this.

We are due to hear later today what the government decision is. Rishi Sunak stated that the economy could cope with a maximum of a four week delay.

UK monthly GDP and Trade balance data both posted positive figures on Friday, but with the cloud of Covid related sentiment dominating the pound at the moment, this did nothing to support the currency. UK Industrial production did post a weak figure of -1.3% and with a plethora of UK data due for release this week, we shall monitor how this may play a role in defining Sterling's path. Employment data is out tomorrow, CPI inflation data on Wednesday and UK retail sales will be released on Thursday, and Bank of England Governor, Andrew Bailey, is also speaking today and tomorrow.

Key Movers

The US dollar starts the week very much on the front foot, with a delayed reaction to Thursday's US CPI posting the key reason. It was the strongest reading since August 2008, with a CPI annual rate of 5% in May. Stronger than expected consumer confidence also supported the dollar.

Focus this week remains firmly on the FOMC and Federal Reserve policy announcement on Wednesday. US Policymakers have remained steadfast in recent times that inflation rises will be transitory, but there is building arguments for why they may need to act sooner rather than later. Interest rates currently remain at a very low 0.25%, but many other central banks are now looking to now begin policy normalisation and tightening of monetary policy. No other economy is allowing their inflation to run as hot as the US, and with this figure being the highest we have seen in 13 years, there could be a change in rhetoric from the US central bank this week, which could help to strengthen the US dollar.

Tuesday's US Retail sales figures will also lie in firm focus for the market. The Federal reserve have been able to use the weak labour market as another rationale for not raising interest rates or tapering asset purchasing programmes.

The EURUSD rate has moved almost 1.2% lower in the last week, mainly due to US dollar strength. With there being no data out for release from the Eurozone this week, focus will also be on the comments made by the European Central Bank last week in their policy meeting. Christine Lagarde steered clear of any talk around tapering Quantitative Easing or increasing rates, which hasn't given the market confidence in the Euro moving forward.

Expected Ranges

GBP/USD: 1.4045 - 1.4135 ▼

GBP/EUR: 1.1590 - 1.1665 ▲

EUR/USD: 1.2060 - 1.2135 ▼

GBP/AUD: 1.8020 - 1.8430 ▲