The Pound rallied from its worst level since mid-May this week in response to hawkish comments from a Bank of England (BoE) policymaker.
At the same time, the US Dollar spent most of the week on the defensive as a prevailing risk-on mood sapped demand for the safe-haven currency.
Pound Rallies on Hawkish BoE Comments
GBP/EUR – Unchanged on the week’s opening levels
GBP/USD – Unchanged on the week’s opening levels
The Pound struggled to attract support through the first half of this week, as the currency was undermined by renewed Brexit friction between the UK and EU regarding the Northern Ireland protocol.
Sterling then rallied in the second half of the week after Bank of England (BoE) policymaker Gertjan Vlieghe hinted the bank could start hiking interest rates from early 2022.
Looking ahead, upbeat PMI releases could help to prop up the Pound next week, especially if the finalised service PMI is revised higher following the reopening of more of the UK economy in mid-May.
Euro Buoyed by Upbeat Eurozone Outlook
EUR/GBP – Down one cent on the week’s opening levels
EUR/USD – Unchanged on the week’s opening levels
The Euro opened this week on strong footing, with optimism over the EU’s vaccine rollout and the Eurozone’s improving economic prospects helping to lift EUR exchange rates.
However the single currency then fell victim to some profit taking in the second half of the week amid fears the Indian variant of the coronavirus could soon find its way to the continent.
Turning to next week’s session, the Eurozone’s preliminary consumer price index could provide a boost to the Euro as economists forecast inflation in the bloc will have continued to accelerate in May.
US Dollar Weakens In Upbeat Trade
USD/GBP – Unchanged on the week’s opening levels
USD/EUR – Unchanged on the week’s opening levels
The US Dollar initially weakened this week, as falling US Treasury yields and a prevailing risk-on mood sapped demand for the safe-haven currency.
After briefly rallying on some hawkish Federal Reserve comments, the US Dollar then fluctuated later in the week after a surprise slump in US durable goods orders.
The spotlight for USD investors will be on the latest US payroll reading. Will a bumper expansion in employment growth in May make up for April’s abysmal reading? Or will another underwhelming release result in another sharp drop in the US Dollar?
Australian Dollar Retreats as Victoria Lockdown Announced
AUD/GBP – Unchanged on the week’s opening levels
AUD/USD – Unchanged on the week’s opening levels
The Australian Dollar rallied through the first half of this week, with the appeal of the risk-sensitive ‘Aussie’ being lifted by rising equities and commodities, as well as a pullback in the US Dollar.
However AUD exchange rates fell from their best levels in the second half of the week following the announcement that the state of Victoria would be going into a seven-day lockdown.
The Reserve Bank of Australia (RBA) will hold its latest policy meeting next week, with the Australian Dollar likely to advance if the bank strikes a hawkish tone.
Jun 1 AUD RBA Rate Decision
Jun 1 EUR Inflation Rate (May)
Jun 1 GBP Manufacturing PMI (May)
Jun 1 USD ISM Manufacturing PMI (May)
Jun 2 AUD GDP (Q1)
Jun 3 AUD Trade Balance (Apr)
Jun 3 EUR Services PMI (May)
Jun 3 GBP Services PMI (May)
Jun 3 USD ISM Non-Manufacturing PMI (May)
Jun 4 EUR Retail Sales (Apr)
Jun 4 USD Non-Farm Payrolls (May)