Pound Sterling

Weekly Update: Euro Lifted by Cautious ECB Optimism, Pound Stumbles from Highs despite Upbeat Data

The Euro firmed this week, finding support from a more upbeat outlook from the European Central Bank and the weakness of its main rival the US Dollar.

At the same time, after an initial surge, the Pound found itself on the defensive through most of this week as some positive data releases were undermined by renewed coronavirus jitters.

Pound Fails to Sustain Gains despite Positive Data

GBP/EUR – Unchanged on the week’s opening levels

GBP/USD – Unchanged on the week’s opening levels

The Pound got off to a strong start this week, soaring against its peers amidst an upbeat market mood.

However, Sterling steadily retreated from its best levels as the week went on, with some upbeat UK data releases being undermined by fears the UK could face a ‘summer surge’ in coronavirus cases.

Turning to next week, in the absence of any major UK data releases, GBP investors could look to domestic coronavirus developments for fresh impetus, with a continued fall in cases potentially boosting Sterling on hopes it will see the government press ahead with plans to reopen the economy.

Euro Firms on ECB Improving Outlook

EUR/GBP – Unchanged on the week’s opening levels

EUR/USD – Up one cent on the week’s opening levels

The Euro trended higher this week, bolstered by both a sharp drop in the US Dollar at the start of the week and by a more optimistic outlook from the European Central Bank (ECB).

Further lifting the single currency was the release of the Eurozone’s latest PMI figures after the bloc reported its fastest increase in private sector activity in nine months.

In the spotlight next week will be the Eurozone’s preliminary GDP figures from the first quarter. This could put significant pressure on the Euro as these are likely to confirm that the bloc suffered a double-dip recession over the winter.

US Dollar Undermined by Falling Yields

USD/GBP – Unchanged on the week’s opening levels

USD/EUR – Down one cent on the week’s opening levels

The US Dollar came under pressure at various points throughout this week’s session, most notably at the start as the currency was undermined by falling Treasury yields and brief spells of positive market sentiment.

The ‘Greenback’ also faced some headwinds in the end of the week following reports that President Biden is planning to hike taxes on the wealthiest Americans.

Looking ahead, the US Dollar may receive a major boost next week as the latest US GDP figures are expected to report another healthy expansion of growth in the first quarter.

Australian Dollar Fluctuates amidst Mixed Market Sentiment

AUD/GBP – Unchanged on the week’s opening levels

AUD/USD – Unchanged on the week’s opening levels

The Australian Dollar traded in a wide range over the past week, with the currency initially riding higher amidst improving market sentiment, before quickly coming under pressure as the mood soured again.

Helping to limit the ‘Aussie’s losses however were Australia’s latest retail sales figures, which revealed a sharper-than-expected 1.4% acceleration of sales growth in March.

In focus next week will be Australia’s latest consumer price index, which could bolster the ‘Aussie’ if domestic inflation accelerated as expected in the first quarter of 2021.

Key Data

Apr 26 EUR Ifo German Business Climate (Apr)

Apr 26 USD Durable Goods Orders (Mar)

Apr 27 GBP CBI Distributive Trades (Apr)

Apr 28 AUD Inflation Rate (Q1)

Apr 28 USD Fed Rate Decision

Apr 29 USD GDP (Q1)

Apr 30 EUR German GDP (Q1)

Apr 30 EUR GDP (Q1)

Apr 30 EUR Inflation Rate (Apr)