GBP resumes strength as lockdown end announced

We were handed a couple of things yesterday that we had been expecting and that came as no surprise at all. The first was that the British Prime Minister laid out the end of masks and social distancing. There were several caveats to that announcement and the final decision on whether July 19th is actually ‘breathe easy day’ will be made next week. However, the fact that the light at the end of the tunnel now has a bulb in it, boosted GBP buying.

That enthusiasm was aided and abetted by a strong service sector business sentiment index and the anticipation of further improving PMIs in the days ahead. We saw the Pound gain nearly a cent against the euro but it still failed to breach EUR 1.17. Sterling also gained against the US Dollar. GBPUSD is hovering just below USD 1.39 this morning.

Aussie interest rates on hold – AUD strengthens

The other tale of the utterly expected was the announcement of ‘no change’ from the Reserve Bank of Australia. The Australian base rate remains at the all-time low of 0.1%. Interestingly, weakness in the US Dollar and this news combined to boost the Aussie Dollar. GBPAUD is down to AUD 1.83 again this morning after two failed rallies in the last fortnight.

The New Zealand Dollar is also attracting buyers after a very solid business confidence index prompted thoughts of earlier interest rate hikes in NZ. The NZIER survey showed a reading of 7% growth in Q2; a healthy recovery after a Q1 reading of minus 13%. GBPNZD is down to NZD 1.9580 this morning, after ending June around NZD 1.98.

USD rally runs out of steam

The aforementioned weakness of the US Dollar is an interesting one. The disagreement between Saudi Arabia and the UAE over oil prices is one factor, the lack of US traders may have been influential and the anticipation of tomorrow’s release of the minutes from the last Federal Reserve meeting will also have played its part. I suspect that profit-taking in the absence of US data was in play as well. US traders will be back at their desks (remotely probably) today and purchasing managers indices will be the drivers of trading decisions.

The same could be said of EU traders, although they haven’t had a long weekend to ponder things. Industrial and construction sector data will be released today along with retail sales data for the EU. The EURUSD rate rose like the GBPUSD one yesterday. That starts the day just below USD 1.19 for the first time this month.

It is going to be a lively Tuesday. I hope yours is a good one.

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