Currency Note

Virus worries weigh on pound

By Carl Hasty June 2nd, 2021

After a positive morning yesterday, the pound lost some ground against the dollar and the euro throughout the day. It’s thought that worries over the Indian variant of the COVID-19 virus and the potential for this to delay the UK’s planned reopening on June 21 are putting pressure on sterling.

For the first time since the start of the pandemic, no coronavirus related deaths were recorded yesterday. However, this has been caveated with the fact that figures are usually lower at the start of the week.

The euro is weaker against the dollar following some disappointing data from Germany this morning. President of the European Central Bank, Christine Lagarde, will speak later today following the release of the Eurozone’s latest inflation figures yesterday.

In the US, there will be a series of speeches from Federal Reserve officials later.

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GBP: Pound weaker due to concerns over June reopening

The pound lost some ground over the course of yesterday against both the euro and the dollar. This could have been due to concerns over the Delta variant of the virus, which has caused some scientists and health experts to call for the June 21 reopening to be delayed.

The final decision on whether the planned reopening can go ahead will be made on June 14. However, a Downing Street source said yesterday that, “At the moment we do not have evidence that definitively suggests we should delay.” However, data that comes out over the next week will be crucial.

The manufacturing PMI figure released yesterday came in slightly lower than predicted at 65.6, however showed a record growth in factory activity as output growth strengthened and new orders rose at the quickest pace in the near three-decade survey history.

Later today, mortgage and consumer credit data will be released.

GBP/USD over past year

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EUR: Downbeat retail sales data from Germany

The euro is slightly stronger against the pound this morning but weaker against the dollar after a disappointing data release this morning.

Retail sales in Germany contracted 5.5% month-on-month in April, reversing from a 7.7% increase in March and worse than forecasts of a 2% drop. Year-on-year, sales increased by 4.4%, which fell short of expectations of a 10.1% rise.

This disappointing data was mainly due to new lockdown restrictions introduced in the second half of April.

President of the European Central Bank, Christine Lagarde, will speak later today. She may comment on Eurozone annual inflation figure that was released yesterday, which came in at 2%, topping the ECB’s target of just under 2%.

USD: Fed officials to speak later today

The dollar is little changed against most major currencies this morning and slightly stronger against the pound.

Manufacturing PMI for the US was revised slightly higher in May to 62.1. This reading showed another record growth in factory activity, with the fastest pace of new orders on record.

Later today, several Federal Reserve officials will speak, and the markets will be listening for any comments surrounding monetary policy.

Their main focus, however, will be on Non-Farm Payroll data, which is due to be released on Friday. This is a monthly employment report, which will reveal how many jobs the US economy added in May.

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