Daily Currency Update

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European Central Bank fails to move markets

GBP - British Pound

Sterling has consolidated its gains this morning after the strong rally seen over the past couple of days where it bounced off two and five month lows versus the euro and dollar respectively.

It seems that some of the concern over COVID-19 case numbers in the UK are starting to wane and there seems to be some encouraging news regarding daily rates of infection, as the 39,906 announced yesterday was the fifth day in a row we have seen less than 50k confirmed and the lowest reading in ten days. It’s too early to read too much into the figures and most expect numbers to rise. However, the fact they have plateaued over the past week is some reason to be a little more optimistic that the third wave we could be heading into may be a little flatter than some modelling has suggested.

Some extra support has also been provided to the pound this morning from better than expected retail sales figures for June being shown at 7am. With market's expecting a drop of -0.2%, the 0.5% growth shown highlights that consumers are continuing to spend since we came out of the winter lockdown. GBP/USD trades at around 1.3740 with GBP/EUR at around 1.1665.

Key Movers

Yesterday’s main event turned out to be a bit of a non-event as the European Central Bank left interest rates unchanged and made no amendments to the Pandemic Emergency Purchase Programme. The message issued from ECB chief Christine Lagarde was one of caution and continuing willingness to act should the economic outlook deteriorate, and also that they expect eurozone inflation to push higher over the next few months before starting to retreat towards the end of the year.

With the exception of French services, most of the top tier PMI numbers released from the eurozone this morning have beaten expectations with all showing strong growth across the bloc as the economy recovers. There is some concern about the uptick in COVID-19 cases in France however as they topped 20k yesterday with a warning being issued that people should expect 50k cases a day before too long.

From the US it was a relatively quiet day with unemployment numbers being the only notable data. Last week saw 419k people file for unemployment insurance, worse than the 350k that had been eyed. COVID-19 infection numbers are continuing to rise with an acceleration in cases in Missouri and Florida, an area of particular concern. This afternoon we have US Services and Manufacturing PMI numbers with continued robust growth predicted.

In news away from finance, the Tokyo Olympics open at midday UK time today. The games are a year late and being played out behind closed doors for the first time in their history highlighting the impact COVID-19 has taken over the past 18 months. EUR/USD trades at around 1.1780.

Expected Ranges

GBP/USD: 1.3680 - 1.3800 ▲

GBP/EUR: 1.1610 - 1.1715 ▼

GBP/AUD: 1.8565 - 1.8700 ▲

GBP/NZD: 1.9640 - 1.9790 ▼

GBP/CAD: 1.7165 - 1.7305 ▼