Sterling drops 3 US cents in 4 days
Moving on, the big game in foreign exchange is the US Dollar. Since last Wednesday, when the Federal Reserve upped the ante by bringing forward their forecasts for US monetary tightening, the Dollar has regained support and momentum.
UK house prices see largest seasonal rise in 6 years
GBPUSD dropped from $1.41 to this morning’s $1.38 in the aftermath of that statement. Sterling may have continued to slide were it not for a better-than-expected house prices survey. A 0.8% monthly rise is driven by the impending change in stamp duty but it is the strongest result since 2015.
The EURUSD rate has slipped too by 2.5 cents to start the week at $1.1875. Every US Dollar related exchange rate has favoured the USD in the last 4 days and that has repercussions elsewhere.
GBPNZD tests 1.9950 but fails
The GBPNZD rate tested 1.9950 on Friday, partly driven by the US Dollar’s impact on commodities and partly due to New Zealand posting its largest current account deficit since June 2008. An improvement in their GDP growth rate wasn’t enough to offset that concern. So, the GBPNZD rate, having tested 1.9950 on Friday is starting Monday at 1.9825 or thereabouts.
Australian retail sales stall
The Australian Dollar is also impacted by the USD and its influence over the value of commodities. The USDAUD rate hit levels we last saw in December and that allowed the better-supported Pound to push a little higher; spiking to 1.85 on Friday. Profit-taking has knocked nearly a cent off that this morning. I am sure that recovery would be a little better but for Australian retail sales, which barely grew at all in May. The markets were expecting 1.1% growth but the actual number was just 0.1%. Commodity prices and the general risk sentiment amongst investors will be drivers for the Aussie Dollar this week.
Monday is light on data but we will hear from a couple of European Central Bank members. It isn’t a lot to get excited about I know. The rest of the week brings US GDP data; the last calculation for the Q1 figure. We will also see Canada’s retail sales, which look set to be quite bad. A 5% drop is forecast, so CAD weakness may well ensue. The Bank of England will set the UK interest rate but no change is envisaged.
Add in a slew of purchasing managers indices and the scene is set for another lively week in forex.
Oh, and I highly recommend you ignore the football. As an avid rugby supporter, I can say that the Bristol v Harlequins and Exeter v Sale semi-finals over the weekend were two of the most entertaining rugby matches I have seen in a very long time. I recommend football fans find them on catchup TV if they can. After all, a game where 22 people can play for an hour and a half without scoring a single goal is a bit of a fraud isn’t it.