News & analysis


Despite touching fresh 3-year highs in the morning of yesterday’s session, the pound plummeted throughout the remainder of the day on very little news flow to ultimately post a 0.43% loss against the dollar. Sterling’s gains have been more driven by the broad downturn in the US dollar as opposed to GBP specific dynamics as concerns over the latest variant cast doubt over the final stage of the UK’s reopening on June 21st. In addition to this, May’s final manufacturing PMI was also revised down during yesterday’s release from 66.1 to 65.6. This morning, monetary indices are set to be released from the UK but are unlikely to have much of a bearing on the pound, while just after midnight the BRC shop price index printed at -0.6% YoY in May. With the data mired by base effects, this also has little weighting on sterling’s performance this morning as the pound trades roughly flat against both the dollar and the euro.


The euro was among the few G10 currencies which managed to escape from the broader USD rebound for the majority of yesterday’s trading session before slipping back to daily lows in the evening. This morning, April’s German retail sales saw a contraction of 5.5% MoM while a much milder contraction of 2.5% was estimated by forecasters. The reading is consistent with weakness elsewhere in the euro area at the start of Q2 following new virus restrictions, however, German outliers in retail sales often are revised later on. This may be the case with April’s reading as well. The good news is that the virus case count in Germany has come down sharply since, which allowed for some easing of restrictions in May. There is little on the calendar in terms of data for the remaining part of the day, with eurozone PPI being the main data point of release at 10:00 BST. The central bank speaker schedule is however quite full and may induce further euro volatility in today’s session, with European Central Bank’s Francois Villeroy de Galhau, Jens Weidmann and Christine Lagarde speaking at 11:15, 16:45 and 18:10 BST respectively. Additionally, the ECB will publish a report on the international role of the euro at 12:00 BST.


The US dollar traded mixed across the G10 currency space yesterday but regained ground at the start of the European session as it trades in the green against all majors. During yesterday’s session, the dollar swung around as the DXY index centred around the 90.0 handle. Looking ahead, today’s calendar includes the release of the MBA mortgage applications at 12:00 BST ahead of a series of central bank speakers. The Fed’s Harker speaks at the Fed Forum on racism and the economy at 17:00 BST while he is also expected to discuss the economic outlook ahead of the release of the Beige Book at 19:00 BST. The report, referred to formally as the Summary of Commentary on Current Economic Conditions, is a qualitative review of economic conditions and may lead to more volatility in USD in the latter part of today’s trading session as markets digest the suite of economic measures that the US central bank assesses before making its latest policy decision. Also at 19:00 BST will be Evans, Bostic and Kaplan who will speak at the Fed forum’s panel.


The Canadian dollar touched its highest level since May 2015 in yesterday’s trading session despite Q1 GDP underperforming expectations. As oil markets climbed on the OPEC+ decision, with WTI hitting a peak of $68.87 before retracing back to the $68 mark, the loonie started to surge while the TSX topped 20,000 for the first time. The rise in oil prices helped the commodity-linked index reach fresh highs as materials and energy accounts for around 25% of the Toronto based index’s market capitalisation. The cartel yesterday stuck by its decision to increase supply by 2m barrels per day between May and June while Saudi Arabia would also commit to unwinding its 1m bpd unilateral supply cut over the same time period. While the news of supply coming back online should’ve weighed on crude oil, the headlines came as no surprise to market participants. However, the deathly silence on the future outlook of production did as the lack of information provided for the coming months sent the signal of caution from OPEC to oil markets. With demand coming back online, the International Energy Agency warned of a looming gap between rising demand and stagnant supply, which further boosted the price of a barrel of oil. The loonie largely focused on oil market dynamics for this reason yesterday despite Q1 GDP undershooting expectations by 1.2% after printing an annualized growth rate of 5.6%. The data calendar is now largely empty until Friday’s labour force survey is published, meaning the loonie will take its cues from the broader G10 move against the dollar today.



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