News & analysis


Sterling was pushed around by broad USD moves yesterday with very few economic events of note in the UK. Over the course of the day, the pound reversed losses of 0.27% to post a 0.14% gain over the dollar. Today, sterling is back trading defensively against the dollar as the greenback reclaims lost ground against the G10 currency board this morning. However, final readings of May’s services and composite PMIs along with the latest real-time indicators released by the ONS at 09:30 BST may start to show signs of more robust data now the economy is reopened on a stronger footing. Yesterday, with regards to the June 21st full reopening, the British Prime Minister didn’t rule out extending the time before full reopening but expressed caution with making the final decision. We argue that the strength of incoming data is more decisive for the pound on a structural level, although the decision to reopen further will have a short-term impact on GBP sentiment.


Yesterday’s session saw EURUSD get swept away by moves centred around the US dollar, while economic data from the eurozone failed to support the bloc’s currency. German retail sales came in at -5.5% compared to the consensus of -2.5% for April in the morning, and a bout of USD strength pushed the pair down further in the latter part of the trading session before recovering overnight again. With no clear driver of the moves, the most traded currency pair is likely to maintain a wait-and-see approach at least until the Federal Reserve and European Central Bank release their latest policy decisions regarding the state of QE. This morning, the euro sits over 0.2% lower against the dollar despite Spain’s PMIs exceeding expectations along with Italy’s services PMI. Later this morning, markets will see the final reading of France and Germany’s services and composite PMIs.


Yesterday’s session was relatively quiet on the whole, with the broad dollar dictating price action in G10 markets. After starting the morning on the front foot, the dollar soon turned around after the DXY hit a session high of 90.246 at around midday in the UK. US investors joined the market and the dollar began to decline, although the moves were gradual over the course of the day. That was until oil markets sprung into life, with WTI rising to fresh highs of $69 per barrel. This resulted in oil-linked currencies taking a chunk out of the dollar ahead of the release of the Fed’s beige book. The economic conditions report saw the recovery pick up somewhat in the past two months, sparking price pressures as businesses contended with worker scarcity and rising costs. This was evident in the last Nonfarm Payrolls (NFP) report, where the wage growth was visible despite the elevated unemployment rate due to a mismatch in supply and demand and increased disincentive to seek employment due to higher unemployment benefits. Today, with the dollar stabilising around the 90 mark on the DXY index again, markets will look towards the initial jobless claims data at 13:30 BST for signs of continued labour market progress ahead of tomorrow’s more market-moving NFP release, while the ISM services index at 15:00 BST will also be of interest.


Yesterday’s session was really quiet on the Canadian news front, with oil markets providing all the stimulus for the 0.3% rally in the Canadian dollar. Today, again events are light, meaning the Department of Energy’s inventory release at 15:30 BST will be one of the standout pieces of data after the API report last night suggested US inventories fell by 5m barrels. With crude sitting at highs not seen since late 2018, the focus is going to be very much on whether WTI can break above the $70 handle as supply limitations continue to become apparent in inventory data.



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