Currency Note

A strong start to the week for sterling

By Alex Bennett June 5th, 2023

This week, the Bank of England will release its July interest rate, which is due to rise by 25-basis points

Sterling enters the week stronger against a few of its rivals, such as the Swiss franc and Japanese yen. The pound also maintains last week’s fresh gains against the euro.

It is a similar story for sterling against the US dollar, which boasts weekly gains of just over half a per cent.

Investors will have plenty economic releases to digest over the course of this week — all of which have the potential to increase volatility for many of our key currencies.

We’ve just seen the latest balance of trade data for Germany, which has revealed that the country’s trade surplus increased to €18.4bn in April. This was much higher than market expectations of €16bn and marked the widest trade surplus since the start of 2021.

Later today markets will see the ISM services PMI for the US. Dollar watchers will be keeping a close eye out for any pre, or post, data volatility.

Balance of trade for the US will be released later this week, as well as the eurozone’s GDP estimates and the Halifax housing price index in the UK.

The end of last week saw several equities end on a high. The French CAC 40 index climbed by nearly 2 per cent on Friday, while Canada’s S&P/TSX Composite index jumped 1 per cent higher. Read on for US equities.

Last week’s unemployment data for the US revealed America’s jobless rate soared by nearly 4 per cent, to a 7-month high in May.

Although this was above market expectations, and marked the highest rate since October last year, the jobless rate remained historically low overall pointing to a tight labour market in the US.

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GBP: BRC retail sales monitor to return on Tuesday

Investors all over will be keeping a close eye on the latest yearly figures, which are due on Tuesday.

In the previous data release, retail sales in the UK rose 5.2 per cent on a like-for-like basis in April 2023 however, high inflation in the UK meant that consumers continued to get less for their money.

GBP/USD over the past year

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EUR: Euro weakens against US dollar

After attempting to recover from its 2-month low against the US dollar, the single currency currently sits around -0.37 per cent lower than the greenback this week.

The recent EUR/USD gains were largely due to hawkish comments from the European Central Bank’s president, Christine Lagarde, last week. Many will be watching closely to see how this week’s economic data impacts the single currency’s strength against its rivals.

USD: US stocks hit 9 month high

Better than expected payrolls data plus a rise in US unemployment pushed US stocks to fresh highs on Friday.

The blue-chip Dow Jones closed over 2 per cent higher at the end of the week, while the S&P 500 gained just under 1 and a half per cent, reaching its highest level since August 2022.

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