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Weekly Roundup: US Dollar Rallies on US-China Tensions, Disappointment over UK’s New Lockdown Policy Dents Sterling

Deteriorating market sentiment helped to give the US dollar a leg up this week, as fears over a new US-China trade war were stoked by comments from Donald Trump.

Meanwhile, the Pound took a dive this week as GBP investors were left disappointed and confused by the UK’s new lockdown policy.

Pound Sterling Slumps on UK Lockdown Uncertainty

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

The Pound took a dive this week amid confusion and disappointment over the very slight easing of UK lockdown measures announced by Boris Johnson over the weekend.

This left Sterling on the defensive through most of the session, with the Pound only finding some short lived gains as the UK’s latest GDP figures showed the UK economy contracted less than expected in the first quarter.

Looking ahead to next week, we are likely to see the Pound maintain its downward trajectory as the UK’s latest data releases are expected to show that economic activity continued to grind to a halt.

Euro Fluctuates as Europe Continues Reopening

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

The Euro traded in a wide range this week, initially strengthening as more European countries began to reopen their economies, with millions of people returning to work in France.

However, the single currency then struggled through the latter half of the week as concerns of a second wave of infections in Europe and confirmation that Germany fell into a recession in the first quarter limited the appeal of the Euro.

Looking forward, the main catalyst of movement for the Euro next week looks to be the publication of the Eurozone’s latest PMI figures, with EUR exchange rates potentially strengthening as economic began to recover in May with the reopening of much of the bloc.

US Dollar Bolstered by US-China Tensions

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

The US Dollar struck higher this week as demand for the safe-haven currency was stoked by escalating tensions between the US and China.

This came as Donald Trump sought to step up his criticism of Beijing and its handling of the coronavirus outbreak, threatening to impose new tariffs or to even cut ties with China as he lashed out in an interview with Fox News.

Turning to next week we may see the US Dollar remain on top so long as the war of words between the US and China continues.

Australian Dollar Tumbles on Deteriorating Market Sentiment

AUD/GBP – Unchanged on the week’s opening levels
AUD/USD – Down one cent on the week’s opening levels

The Australian Dollar was driven lower over the past week as a souring of market sentiment dented the appeal of the risk-sensitive currency.

This was not helped by Australia’s latest jobs figures, which reported a record surge in unemployment in April.

In the week ahead, the ‘Aussie’ is likely to face additional pressure if we see concerns over a new US-China trade war continue to hang over markets.

Key Data
May 19 GBP Claimant Count (Apr)
May 19 EUR ZEW Economic Sentiment (May)
May 20 GBP Inflation Rate (Apr)
May 21 GBP Composite PMI (May)
May 22 GBP Retail Sales (Apr)
May 22 EUR Composite PMI (May)

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