GBP: Big risks for sterling next week
EUR: Showing a lot more resilience
USD: Still looking at weakness through summer
Sterling
It’s disappointing that sterling didn’t manage to get to and hold the 1.40 mark against the USD yesterday, especially given the weak US GDP numbers. A lot of the UK recovery is already shown in the sterling price, limiting the opportunity for a fresh run higher purely on the current positive sentiment; something new has to happen.
Next Thursday’s calendar is chock full of event risk with both the Bank of England meeting and the local elections taking place. Both have the power to move sterling by a couple of per cent with outsized moves possible should the Scottish independence movement garner a lot of support or should the Bank of England hint at the possibility of lowering the level of stimulus its currently providing to the UK economy.
If the current levels in sterling are amenable for your needs, it may be best to action something sooner rather than later; next week could see them taken away.
Euro
Like sterling, the euro didn’t manage to sustain its gains against the USD yesterday. The euro however is a lot better supported than it was back in January and February and should be able to hold its head up a lot more successfully against a stronger USD.
Stronger earnings from European businesses announced this morning should offer the euro a little support today as well.
US dollar
While the Q1 GDP report from the US showed a stonking 6.4% growth rate in the first quarter of the year it missed analyst’s expectations. Higher US bond yields helped the USD strengthen yesterday despite the relatively quiet Fed meeting on Wednesday evening. It remains our belief that the USD will weaken in the coming months but higher US bond yields remain a stumbling block to this call.
Elsewhere
JPY has rebounded well from a two-week low overnight on slight haven demand seen in Asian markets. We are worried about the longer-term prospects for the Japanese yen given the wider recovery for global businesses and consumers.
Market rates
Today’s interbank rates at 09:12 against sterling. Movement vs yesterday.
| Euro | €1.149 ↓ |
| US dollar | $1.391 ↑ |
| Australian dollar | $1.791 ↓ |
| South African rand | R20.00 ↑ |
| Japanese yen | ¥151.4 ↓ |
Have a great day and a wonderful weekend.
