French parliamentary election worries
The euro wavered on Monday as EUR investors were unnerved by the result of the French parliamentary elections.
Meanwhile, the pound opens today’s session on firm footing, with GBP/EUR stable at €1.1650 and GBP/USD climbing to $1.2299. GBP/CAD is rangebound at C$1.5882, while GBP/AUD and GBP/NZD tick up to AU$1.7621 and NZ$1.9359, respectively.
Looking ahead, the continued absence of high-impact economic data could leave currency markets to be driven primarily by risk appetite today.
Looking ahead, will another surge in UK inflation leave GBP exchange rates on the back foot ahead of the publication of Chancellor Rishi Sunak’s Spring Budget?
What’s been happening?
The euro was subdued yesterday amidst concerns over political paralysis in France after President Emmanuel Macron’s party lost its majority in parliament.
European Central Bank (ECB) President Christine Lagarde’s testimony in front of the European Parliament further suppressed movement in the single currency as she reiterated the bank’s plans to raise interest rates by only 25bps in July.
The pound initially edged higher at the start of this week, with the increasingly risk-sensitive currency being underpinned by cautious optimism.
However, Sterling then wavered in the wake of comments from Bank of England (BoE) policymaker Catherine Mann in which she suggested that a weak pound bolsters the case for the bank to pursue a 50bps interest rate hike.
Finally, USD exchange rates traded sideways on Monday as the closure of US markets for the Juneteenth holiday resulted in thin trading conditions in the US dollar.
What’s coming up?
With notable economic releases still thin on the ground today, movement in the currency market may continue to be influenced by investor sentiment.
The euro could face an uphill battle as Russia’s throttling of European gas exports stokes fears of potential energy shortages on the continent this winter.
Across the pond, the reopening of US markets following the long weekend could help to revive demand for the US dollar, particularly if global recession fears continue to grow.
In the meantime, the pound could be influenced by the publication of the Confederation of British Industry’s order book balance. Will a dip in the CBI’s industrial orders index this month weaken Sterling?
Need a chat about moving your money around? Contact Alastair on alastair.archbold@currenciesdirect.com to find out more about the latest news or how it could impact your currency transfers or your local agent Fiona on fiona.warren_agent@currenciesdirect.com.
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