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GBP/USD Meanders amid Global Trade Uncertainty

Last week’s high: $1.3565

Last week’s low: $1.3303

GBP/USD Supported by Accelerated UK Services Sector Activity

The pound US dollar (GBP/USD) exchange rate traded within a relatively narrow band last week, bolstered by worsening international trade relations and an upbeat UK services PMI but limited by a storm of controversy regarding the Brexit ‘backstop’ plan and general uncertainty regarding the UK’s exit from the EU.

Data for the UK was largely positive, with the latest Markit services PMI smashing expectations with a rise to 54.0 in May.

Data for the US was also rather upbeat, with the ISM non-manufacturing services composite print storming ahead to 58.6, up from the previous score of 56.8 and the number of citizens applying for jobless claims falling to its lowest level in 44 years.

Unfortunately USD bulls were prevented from having their cake and eating it by a storm of political trade turmoil, with tariff threat retaliations from the EU, Mexico and indeed Canada spooking investors and keeping the ‘Buck’ on an uncertain footing.

This Week for GBP/USD: US Fed Rate Decision Expected to Dominate Headlines

The main event this week will be the highly anticipated US Federal Reserve’s June rate meeting (due on Wednesday) which investors have spent the past month pricing in a rate hike for.

Where there is less certainty, however, is the direction the bank will take with their forward guidance – particularly regarding the proposed number of rate rises this year.

If the central bank points to four rate hikes this year, rather than three, then the US dollar could surge even higher.

Beyond this, investors will be assessing the US consumer price inflation results, average hourly earnings, retail sales and the University of Michigan sentiment index, all spread throughout the week.

The cherry on the cake (though somewhat unrelated) however, will be the Trump-Kim summit, held in Singapore on Tuesday.

If this meeting proves fruitful then we could see risk aversion in the markets fall even lower.

It is unlikely that this meeting will do much to encourage investment in the ‘Buck’, however.


Key Events

11th June

16:00 USD Consumer inflation Expectations

12th June

11:00 USD NFIB Business Optimism Index May

13:30 USD Inflation Rate May

19:00 USD Monthly Budget Statement May

13th June

13:30 USD PPI May

19:00 USD Fed Rate Decision

14th June

13:30 USD Retail Sales

15th June

15:00 USD Michigan Consumer Sentiment June

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To keep up to date with the Euro, visit the Euro blog in our Currency News section.



Arron Morris
Currency Trader
T: 01442 892 062

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