Pound Sterling

Weekly Update: Pound Rally Cut Short by Dovish BoE, US Dollar Weakens in Risk-On Trade

A rebound in the Pound was cut short this week, after GBP investors were left disappointed after the Bank of England (BoE) struck a more dovish-than-expected tone following its latest policy meeting. 

At the same time, the US Dollar spent most of this week on the back foot, as a prevailing risk-on mood undermined demand for the safe-haven currency. 

Pound Tumbles in Response to Disappointingly Dovish BoE 

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

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

The Pound trended broadly higher through the first half of this week’s session, rallying in response to some Brexit optimism and hawkish expectations ahead of the Bank of England’s (BoE) latest policy meeting.  

This gave way to a sharp selloff of Sterling in the latter half of the week as these hawkish expectations proved to be misguided, with the BoE striking a more dovish-than-expected cord in its latest forward guidance. 

Coming up next week, the release of the UK’s latest GDP figures may provide some support to the Pound, if the final estimate sees growth in the first quarter revised higher again. 

Euro Undermined by Cautious ECB 

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

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

The Euro opened this week’s session on the front foot, with the single currency bolstered by a pullback in the US Dollar.  

Reinforcing this upside in the Euro were some positive EUR data releases, with the latest Eurozone PMIs and German business climate index printing above expectations in June. 

The publication of the Eurozone’s latest CPI figures will likely act as a key catalyst of movement in the Euro next week, with another rise in inflation potentially providing some lift to the single currency. 

US Dollar Slips in Upbeat Trade 

USD/GBP – Down one pence on the week’s opening levels  

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

The US Dollar was placed on the defensive this week, with initial losses coming amidst a bout of profit taking by USD investors.  

This downside was then extended by the release of some lacklustre US data as well as optimism over Biden’s infrastructure stimulus plans, which further sapped demand for the safe-haven US Dollar towards the end of the session. 

Centre stage next week will undoubtedly be the latest US payroll figures, with the US Dollar poised to plunge if June’s release falls short of expectations once again. 

Australian Dollar Strengthens amid Improving Risk Appetite 

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

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

The Australian Dollar rallied this week, with a prevailing risk-on mood and robust PMI figures providing support to the high-yield currency.  

However, these gains were tempered somewhat in the second half of the week amidst concerns over a coronavirus outbreak in Sydney.  

Turning to next week’s session the primary focus for AUD investors is likely to be Australia’s latest trade figures. Will another healthy trade surplus in May help to further boost the ‘Aussie’? 

Key Data  

Jun 29 EUR German Inflation Rate (Jun) 

Jun 30 AUD RBA Lowe Speech 

Jun 30 AUD Business Confidence (Jun) 

Jun 30 GBP GDP (Q1) 

Jun 30 EUR Inflation Rate (Jun) 

Jul 1 AUD Trade Balance (May) 

Jul 1 GBP Manufacturing PMI (Jun) 

Jul 1 USD Initial Jobless Claims (26/Jun) 

Jul 1 USD ISM Manufacturing PMI (Jun) 

Jul 2 EUR German Retail Sales (May)  

Jul 2 USD Non-farm Payrolls (Jun)