• Audere Research

Weekly FX Outlook June 1st


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GB Pound

Sterling reached a new multi-year high against the Dollar.


Movements

GBPUSD opened at 1.4159 and mainly traded sideways during the first part of the week before gaining momentum and reaching a 3-year high (1.4248) earlier this morning. The pair closed at 1.4238 with a weekly performance of +0.56%.


GBPEUR opened at 1.1613 and after losing some ground at the beginning of the week, it rebounded on Thursday to close relatively unchanged (+0.17%) at 1.1633.


Movement rationale

Sterling traded within recent ranges against the Euro and the Dollar during the first part of the week as a thin economic data calendar kept the currency moving with a consolidation stance. The Pound went under pressure on Wednesday as Dominic Cummings, the PM former adviser, set some fire in his testimony over Mr. Johnson’s mismanagement of the pandemic. The currency then started to recover on Thursday, supported by hawkish comments from Vlieghe, an external member of the Bank of England’s MPC, who hinted that the central bank could raise interest rates as soon as the first half of next year if there is smooth transition of workers off furlough and into employment. The statement, together with optimism around the re-opening of the economy, sent GBP to a 3-year high against the Dollar, and further supported the sentiment for a generally positive outlook for the currency.


Week ahead

The weeks ahead has a light UK economic calendar:


Calendar

Tuesday 9:30am | Markit Manufacturing PMI (May)


US Dollar


The US Dollar hits new lows versus Sterling and Euro.


Movements

EURUSD began the week at 1.2191 and initially moved higher, hitting a new 4-month high at 1.2264 on Thursday. In then reversed the movement, trading briefly down to 1.2130 before recovering toward the end of the week to close up by 0.38% at 1.2238.


GBPUSD opened at 1.4159 and mainly traded sideways during the first part of the week before gaining momentum and reaching a 3-year high (1.4248) earlier this morning. The pair closed at 1.4238 with a weekly performance of +0.56%.


Movement rationale

The Dollar continues to remain under pressure amid improved risk sentiment and a dovish monetary stance by the central bank. Fed speakers commented on prospects that recent inflationary pressure is likely to be transitory rather than lasting, pushing forward expectation of a rate hike far into next year. Some support for the Greenback was in display on Wednesday as US yields edged higher. Further relief for the Dollar came from some positive data, with US initial jobless claims reaching the lowest level since mid-March 2020, durable goods orders surging by 2.3% and some inflation data posting its biggest annual rise since 1992. Further, President Biden $6 trillion infrastructure plans raised expectations of higher debt and higher bond yields, supporting the currency. However, The USD recovery was short lived, as the currency quickly erased the recent gains as the market digested the economic data and month-end flows started to dominate for rest of the week.


Week ahead

The US economic calendar including the following:


Calendar

Tuesday 3pm | ISM Manufacturing PMI (May)

Thursday 2:30pm | ADP Employment Change (May), Initial Jobless Claims (May 28), ISM Services PMI (May)

Friday 1:30pm | Nonfarm Payrolls (May), Unemployment Rate (May)


Euro


The Euro was firm.


Movements

EURUSD began the week at 1.2191 and initially moved higher, hitting a new 4-month at 1.2264 on Thursday. In then reversed the movement, trading briefly down to 1.2130 before recovering toward the end of the week to close up by 0.38% at 1.2238.


GBPEUR opened at 1.1613 and after losing some ground at the beginning of the week it then sharply recovered on Thursday to close relatively unchanged (+0.17%) at 1.1633.


Movement rationale

The Euro advances against most of its peers on improved risk sentiment and positive economic data. The IFO German business confidence beat estimates and surged as the economy rebounds from crisis, while the Eurozone confidence soared further in May, which is now above its pre-pandemic level for the second consecutive month. Also, the rapid acceleration in the rollout of vaccines in the Eurozone provided further support to the currency.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Tuesday 7am | Consumer Price Index (May), Unemployment Rate (Apr)

Thursday 9am | Markit PMI Composite (May)

Friday 10am | Retail Sales (Apr)




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