Sterling recovers its mojo as freedom day approaches
Wednesday was a day of range trading across most currency pairs. With a lack of unexpected data, there were few incentives for traders to get heavily involved. Nothing in the data that was released or the comments of the multitude of central bankers who gave speeches was enough to move the markets.
Sterling is off its lows though after the British Prime Minister renewed his commitment to reopen the economy on 21st June (the so-called Freedom Day). There are obvious caveats to that, with the Indian variant still causing localised concerns in the areas of the highest concentration of Indian diaspora, the government may have to look at localised restrictions.
So the GBPUSD rate starts Thursday around $1.4150, GBPEUR is revolving around €1.16 and the EURUSD rate is still capped by $1.22 to 1.2250.
Overnight news was quite muted. Chinese service sector sentiment has cooled a little, as has Japan’s. Australia’s retail sales were in line with expectations and their trade surplus grew a little. However, Sterling’s rebound managed to push the GBPAUD rate up to A$1.8330, which is where we start today. A$1.8420 is a level this pair has been above since May 2020. If that level is breached, the upside is immense.
And while we are in the antipodes, the GBPNZD rate is also elevated. This pair is up to NZ$1.9625 for the first time since 25th May. It looks like it has the momentum to push higher too. The obvious target is the March high of NZ$1.98; a level it hasn’t exceeded since August 2020.
PMIs fill the skies
Today is another one full of purchasing managers Indices (PMIs) and we will see these for the various sectors from the EU, UK and US. The afternoon session is dominated by US employment data and the US equivalent of the PMI index provided by the Institute of Supply Management (ISM). This latter data is expected to be very upbeat but whether it could weaken or strengthen the USD is an open debate. Would a positive set of data encourage investors to sell US assets and seek better yields elsewhere or would it strengthen the USD because it may hasten monetary tightening from the Federal Reserve? Probably both things will happen to a greater or lesser degree, so volatility in the USD is pretty much inevitable.
And on this day in 1967, Aretha Franklin released the wonderful Respect. R E S P E C T. Now, if that is stuck in your head for the rest of the day, it won’t be a bad thing.
