News & Analysis


Trading at a one-month high, GBPUSD is struggling to find much more upside as it trades just 0.04% higher this morning despite the broad dollar weakness across the G10 space. Positive fiscal developments last week have failed to net off the concern caused by the near-historic downturn in the May services PMI, and with little room to price in more rate hikes from the Bank of England, GBP bulls are finding little support from rates markets. Arguably, a string of more constructive consumer data is needed for GBP to find a firmer footing at current levels. Unfortunately, such data is largely absent from this week’s reduced data calendar beyond consumer credit data for April tomorrow.


Similar to the pound, the euro sits at a one-month high against the dollar this morning as hawkish ECB commentary and a broad rebound in global equity indices has aided sentiment around the single currency. This morning, positive growth news out of China is adding to the bullish near-term outlook for the euro as external pressures start to alleviate, however, domestic data continues to highlight the acute economic hurdles that face the ECB in the coming months. Data out of Spain this morning unexpectedly showed inflation spiking from 8.3% to 8.7% YoY as prices grew some 0.8% in May. While only a preliminary estimate, the data this morning acts as a precursor for Germany’s inflation reading later today at 13:30 BST and France’s on Tuesday ahead of the euro-area wide measure at 10:00 BST tomorrow. Before Germany’s inflation reading later today, eurozone confidence indices for May are released at 10:00 BST.


The dollar broadly declined further on Friday as global equities continued to recover. The improved risk backdrop, as denoted by the performance of equity benchmarks, resulted in currencies most exposed to global risk conditions (high beta currencies) outperforming. AUD, NZD, and NOK all posted over a percentage point in gains against the dollar on the day. This morning, news of looser Covid restrictions in Beijing and Shanghai over the weekend means the feel-good factor remains in the cross-asset space: shares in the APAC space are all higher this morning, while European and US equity futures all trade in the green. The positive growth news out of China has supported APAC currencies, such as CNY, AUD and NZD this morning. However, gains aren’t isolated to currencies with high exposure to the Chinese economy as the improved Chinese growth outlook weakens haven demand for the dollar across the FX market. Today, the dollar may continue to trade on the backfoot as liquidity conditions dry up in the afternoon of the European session as US markets are closed for Memorial Day.


The loonie traded straightforwardly last Friday, strengthening consistently throughout the day with minimal volatility to close 0.4% lower against the dollar compared to the day prior. The loonie’s move was in line with most G10 currencies, which rallied along with global equities as risk sentiment turned positive. Most of the CAD move can be explained by the boost in global equity benchmarks as US and Canadian bond markets were essentially unchanged on the day, with yields moving less than a full basis point, and oil prices sitting only 0.9% higher. Today’s calendar only has low-impact Canadian data scheduled for release (BBG/Nanos confidence index and current account balance), meaning the loonie is likely going to remain highly correlated with global equity performance.



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