Global Themes

  • GBP/USD continues downward spiral
  • Dollar reigns supreme
  • France, Germany to lead EU reform


GBP/USD continues downward spiral 

GBP/USD fell to a one-month low of $1.3916 overnight as Sterling continues to be sold off. Cable has retraced slightly this morning, bouncing off the $1.3950 mark which now looks like a key level for market participants. The question now is whether or not the pound can recover lost ground to rise back above $1.40, or if we will see it fall below $1.39 for the first time since mid-March. GBP/EUR continues to hold just above €1.14, but the pressure currently appears to be on a downward trend towards the €1.13 handle rather than a run back up to the €1.15 handle in the short term.

Attention will now be focused on two big events at the end of this week. On Thursday, a vote will be held in the House of Commons on the UK’s access to the EU Customs Union post-Brexit. The Government has dismissed the vote, outlining a commitment to leave the union regardless so that the UK can reach its own trade agreements.

  • A defeat for the Government would look damaging for Prime Minister Theresa May, although market participants may actually welcome a defeat. Staying in the Customs Union has been something that a lot of business leaders have been pushing for and would solve some of the issues over arranging the Irish border post Brexit. On Friday we see the release of UK Q1 GDP data and this is expected to show the UK still lagging in growth.


Dollar reigns supreme 

The US Dollar Index – its value against a basket of currencies - has continued its winning streak, rising to its highest level since the beginning of the year. Demand for the dollar has been boosted with US treasury yields (long term interest rates) rising, making it a worthy investment. Notably, the US 10-year treasury note peaked to over 4-year highs and to within touching distance of the 3% level (source: Reuters). US Dollar traded currency pairs have all seen swings over the past 24 hours.

EUR/USD has fallen to the lower end of its recent trading range of $1.22- $1.25. The pair fell in the early hours of the morning to a 7-week low low of $1.2183, before it then retraced and consolidated above $1.22. USD/JPY has peaked to over 2-month highs of ¥108.86; should the ¥108 handle hold we could see a continued positive trajectory with ¥110 insight.

  • US consumer confidence is to be released at 3:00pm this afternoon, with the forecast to show a slight contraction for the period of April. The previous number showed a figure of 127.7, with a Reuters poll forecasting a dip to 126. Despite today’s forecasted number, US consumer confidence has been steadily rising over the past 10 years, underlining the resilience of the US economy.


France, Germany to lead EU reform 

Germany and France have been the more outspoken on the need for reforming of the Eurozone (EZ). German Chancellor Angela Merkel has pushed for ‘compromise’ on the reform while French President Emmanuel Marcon has pressed for ‘solidarity’ among remaining members (source: Reuters). The pair want to ensure that the EU can present a united front at the June EU leaders meeting.

  • Though their own agendas slightly differ on economic and fiscal policies, the willingness to push for a more consolidated EZ could prop the Euro up over the medium-term. However, the original idea was to present the reform plans in March, but this has been pushed back while the plans are finalised which could suggest there are still some divided objectives.

*The rates displayed by our free currency converter are neither "buy" nor "sell" rates, but interbank rates, the wholesale exchange rates between banks. Interbank rates don’t include the spreads, handling fees, and other charges that may be assessed by foreign exchange providers. Please note that, as such, these rates are provided for indicative purposes only. Prior to booking a transaction, Western Union Business Solutions will advise you of the actual rate then available for a particular currency transaction.

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