Israeli leadership change marginally strengthens ILS

Upheaval in Israel, with the dethroning of Benjamin Netanyahu after 12 years in office and the formation of a grand coalition was not as impactful on the Israeli Shekel as you might imagine. GBPILS rose from 4.5650 to 4.6030 and then fell back to 4.5850, which is where it starts Monday. Now we await the actions of the new coalition to determine the direction of the shekel from here on.

The markets were quiet overnight; what with Chinese and Hong Kong markets being closed for Dragon Boat Festivals and the Australian market shut for the Queen’s Birthday. I always find it odd how Australia celebrates our Queen’s Birthday but the UK doesn’t. That’s a shame.

Either way, the day ahead won’t be as quiet. It started with a drop in Japan’s capacity utilisation but a healthy 2.9% rise in industrial production. That saw the GBPJPY rate drop half a Yen to 154.65 as I write.

We will see industrial production data from the Eurozone this morning too. A vigorous uplift is expected there as well. The Euro isn’t faring well though after the ECB’s President Lagarde suggested a delay in any monetary tightening by the bloc’s bank.

UK manufacturers report best Q1 in 30 years or more

Sterling is holding up well despite most commentators assuming the reopening of the UK economy will be pushed back a month when the UK Prime Minister makes his announcement later today. Meanwhile, Make UK, which represents 20,000 British manufacturing, engineering and industrial companies has reported the highest volume of activity since its research began 30 years ago. That was for Q1 of 2021. They are forecasting a much stronger recovery than they foresaw at the start of the year. I love a good news story, don’t you?

Sterling is up to test EUR 1.1650 again and managed to test NZD 1.98 at the end of last week. Like every other currency though, the Pound is suffering a little at the hands of the US Dollar, which is the big winner at the moment. Sterling’s challenges this week include retail sales data, the unemployment rate and speeches by BOE speakers.

USD stronger ahead of Fed meeting

The US Dollar story sees GBPUSD down to $1.4115 and EURUSD hanging on to $1.21 by its fingernails. This surge of USD strength is related to this week’s US Federal Reserve meeting. Whilst the US base rate is likely to remain unmolested, the Fed’s policy statement will be very closely scrutinised for evidence of the timing of the Fed’s first step towards more normal interest rates and a reduction in their mahoosive bond-buying binge. The USD has strengthened ahead of the meeting on Wednesday but could strengthen further if the Fed gives the markets the info they need on the timing of tighter monetary policy. Conversely, if the Fed delays again, the USD will resume its decline.

AUD traders watching RBA

The Australian Dollar will be volatile overnight when Aussie traders get back to their desks after a long weekend and the Reserve Bank of Australia publishes the minutes from their last meeting. As with the US Fed, the markets are just after guidance from the RBA on their next policy change.

Oh and I hear England won a football match. That’s nice.

And you’ll be pleased to hear it is International Bath Day. I am glad they remind me. I like to have a bath once a year whether I need it or not.

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