GBP: Brexit risk rears its head

EUR: ECB happy for the euro to weaken

USD: Dollar ending the week stronger

Sterling

A weak retail sales picture overnight has further punctured sterling’s balloon and dragged the currency lower across the board. While consumers are still spending money, they were using chip and pin machines in restaurants and pubs more than in supermarkets and shops in May, spending that isn’t captured by the retail sales picture.

Brits are still spending money; they are just spending it in different places.

Brexit risk is also hurting sterling this morning with the end of the month set to see a showdown between the UK and the EU over the extension of certain grace periods within the Northern Ireland protocol. The UK wants an extension, the EU doesn’t and this could prompt the first round of real Brexit retaliation between the two.

Euro

The European Central Bank are more than happy with the tone of the Federal Reserve meeting from Wednesday night with the Chief Economist in Frankfurt seeking to make sure markets understand that the ECB is nowhere close to the Fed’s plans yet.

This in turn will limit the euro moving forward and we may be looking at a ceiling of 1.1950-1.20 in EURUSD and a floor of 1.16 in GBPEUR.

US dollar

With Monday a bank holiday in the United States, we expect today’s trade to be relatively quiet as investors remain unsure as to how to position themselves following the Federal Reserve meeting. Dollar now has a little bit more 2-way risk in it than it did beforehand and sets up for a summer of dollar strength against low-yielding currencies (SEK, EUR, CHF and JPY) and weakness elsewhere as long as volatility remains low and confidence in the recovery remains strong.

Elsewhere

The oil price rise reversed steadily yesterday as markets came to terms with the Federal Reserve meeting on Wednesday night. Commodity currencies weakened overnight as well, allowing better levels for those looking to buy AUD, NZD, ZAR and NOK.

Market rates

Today’s interbank rates at 09:03 against sterling. Movement vs yesterday.

Euro	€1.165 ↓
US dollar	$1.388 ↓
Australian dollar	$1.840 ↑
South African rand	R19.52 ↑
Japanese yen	¥152.6 ↓

Have a great day and a better weekend.

P.S. Prediction for tonight: England 2-0 Scotland.