The Pound has begun Thursday’s European session trending in a tight range against both the Euro (GBP/EUR) and US Dollar (GBP/USD).
A flurry of high-profile economic data releases yesterday provided some volatility for major exchange rates, although losses accrued by the US Dollar against both the British Pound (USD/GBP) and Euro (USD/EUR) following the release of some disappointing US employment data proved to be short-lived. With political uncertainty in the UK and markets awaiting clarification from the European Central Bank (ECB) over its next steps, further volatility is to be expected as more detail begins to emerge.
US Employment Data Spooks Market, US Dollar Exchange Rate Declines
The release of the ADP Payroll data yesterday served up something of a shock to the market, with just 27,000 jobs having been added in May, against expectations which were around seven times higher. The US Dollar slumped, at least temporarily, off the back of the news, with concern building as to what this means for tomorrow’s Non-Farm Payroll and Average Hourly Earnings data releases. In recent days, the Federal Reserve has become more vocal in hinting that a rate cut is coming. While there’s little expectation that this will be pushed through at the next meeting in just two weeks’ time, disappointing salary growth has the potential to raise fresh questions over how to sustain inflation.
Euro to US Dollar (EUR/USD) Exchange Rate Breaks Above 1.13 – All eyes on the ECB
The Euro broke above 1.1300 against the US Dollar (EUR/USD) for the first time in almost seven weeks yesterday, spurred on by disappointing employment numbers from across the Atlantic. However, gains were short-lived, with anticipation over today’s European Central Bank rate-setting meeting weighing. Some action is expected as the bank looks to address sluggish inflation, with details of the cheap ‘TLTRO’ (targeted longer-term refinancing operations) loans to Eurozone banks, and the potential to push back the timing of any policy tightening again both seen as likely options. Dovish sentiment from the ECB has the potential to see further downside pressure being applied to the Euro exchange rate.
GBP/USD, EUR/USD and GBP/EUR Exchange Rate Movements
The Pound rose against the US Dollar (GBP/USD) yesterday off the back of the worse than expected ADP Payroll report. However, the market was quick to acknowledge that this reading in isolation may yet prove to be something of an outlier, with the publication of some significantly better-than-expected business activity data adding to the optimism and reversing Sterling’s gains. With political uncertainty taking a toll on the British Pound too, sustaining any upside could remain challenging.
The Euro exchange rate against the US Dollar (EUR/USD) also saw increased volatility through Wednesday’s session, driven largely by US economic data. Uncertainty as to just how cautious the European Central Bank will be with today’s policy announcement is taking a toll on the common currency. Further movement in the Euro exchange rate is likely to be seen as a result of this statement.
The Pound is stabilising against the Euro (GBP/EUR), following recent bouts of selling. Again, the European Central Bank’s policy statement later today will likely be instrumental in providing further direction here, although given the political uncertainty that’s gripping the UK right now, upside for Sterling could yet prove limited.
Why did it move? AUD/USD
The Australian Dollar slipped against the US Dollar (AUD/USD) off the back of yesterday’s better-than-expected US ISM business activity data, giving up the currency’s hold on the 0.7000 level. Losses were capped following the release of some broadly better-than-forecast export data from Australia overnight, with the pair now trading around 0.6970.