The pound was able to mount a recovery against its peers on Friday, with a U-turn from Trump regarding a post-Brexit trade deal helping to light a fire under Sterling.
Sterling appears to be consolidating at the start of this week, with GBP/EUR muted at €1.1321, GBP/USD flat at $1.3239 and GBP/CAD stable at C$1.7413, while both GBP/AUD and GBP/NZD are holding steady at AU$1.7820 and NZ$1.9544 respectively.
Looking forward, the most high-impact release today looks set to the latest US retail sales figures, with an expected slowdown in sales growth likely to drag on the US Dollar.
What’s been happening?
The pound initially fell back at the start of Friday’s session, with markets spooked by comments made by Donald Trump late on Thursday.
In an interview with The Sun newspaper President Trump appeared to blast Theresa May’s hard fought Brexit proposals, suggesting a soft approach to Brexit ‘will probably kill’ any chances of a UK-US free trade deal.
However Sterling found some much needed relief in the afternoon as, in a joint press conference with May, Trump appeared to perform a complete 180, telling reporters that a trade deal would be possible.
The GBP/EUR exchange rate enjoyed a notable recovery in the wake of Trump’s U-turn, aided by the downturn prompted in the euro in the face of a strengthening US dollar, with the euro being exposed to considerable losses due to its position as the dollar’s most traded currency partner.
This strength in the US dollar was mostly driven by yet another escalation in trade war fears as China posted a record trade surplus with the US, something unlikely to dissuade Trump from pursuing his current protectionist policies.
With the ‘Greenback’ enjoying considerable demand, it largely offset the rally in the Pound, leaving the GBP/USD exchange rate to close out the session close to the day’s opening levels.
What's coming up?
While there’s no high-impact data scheduled from the UK today, the pound could begin edging up as markets brace for the release of Britain’s latest employment figures on Tuesday.
GBP investors will be hoping for another uptick in UK wage growth tomorrow as they look to gauge whether the Bank of England (BoE) will target an August rate hike.
Meanwhile the euro could trade higher at the start of this week’s session, possibly finding support from an expected jump in the Eurozone’s latest trade balance.
Finally, the biggest release of the day looks set to be June’s retail sales data from the US, with a suspected slowdown in sales growth potentially pressuring the US dollar this afternoon.
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