Currency Note

Sterling makes surprise recovery

By Alex Bennett June 8th, 2022

After weakening yesterday morning following the vote of confidence, the pound made a surprise recovery against a handful of currencies in the afternoon.

This boost seemingly occurred for no clear reason. Sterling has now plateaued against the euro and the dollar and is still trading around strong levels this morning.

Data released this morning shows that there are signs that the UK housing market is cooling. Annual price rises eased to their slowest pace since January in May.

Later today, GDP and employment figures will be released for the eurozone, which could set the tone for the European Central Bank’s monetary policy meeting tomorrow. Officials are expected to pave the way for interest rate hikes over the coming months.

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GBP: A boost for sterling despite political uncertainty

The pound experienced a day of volatility yesterday. After weakening in the morning following the vote of confidence in Boris Johnson, it then strengthened against the euro and the dollar in the afternoon.

Sterling tends to dislike political unrest, which is why it weakened in the morning. It then made a surprise recovery in the afternoon. The pound has levelled off this morning and is still strong against the euro and the dollar.

PMI data released yesterday showed that the services sector grew at its slowest pace since February 2021. Data also showed that the manufacturing sector grew at its slowest pace in 15 months due to a slowdown in growth of business activity and new orders.

GBP/USD past year

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EUR: GDP and employment figures expected today

The euro weakened against the pound and strengthened slightly against the dollar yesterday afternoon.

Data released yesterday revealed that German factory orders came in lower than expected in April, showing that the war in Ukraine, ongoing supply constraints pressured by China lockdowns and soaring energy prices are weighing on the German economy.

Later today, GDP growth figures and employment data will be released ahead of the European Central Bank’s monetary policy meeting tomorrow.

USD: Markets look to inflation data on Friday

The dollar is slightly weaker against the pound and the euro this morning. This comes ahead of a slew of economic data releases this afternoon, including mortgage and crude oil figures.

The main event this week, however, will be the release of US inflation data on Friday. Inflation is predicted to have stayed the same year-on-year in May and core inflation is predicted to have decreased slightly.

Balance of trade figures were released for the US yesterday, showing that trade deficit in the US narrowed to a four-month low of $87.1 billion in April from a record of $107.7 billion in March. Exports increased to a record high, whilst imports declined.

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