Euro Spiked Significantly Overnight

2 July, 2018

Simon Eastman

Having seen the euro spike significantly overnight, the pound found itself at the very bottom of the technical range as trade started on Friday. to close the month, we only had UK GDP of significance to come, released at 9.30am.

Fortunately for the ailing pound, this came out slightly better than forecasts at 0.2 percent growth, opposed to 0.1 percent. Not much better but it spurred the pound on to make small gains against the euro and the US dollar, as well as against other major currencies. Mortgage approvals and money supply figures for the UK also post higher than expected, but gains were limited as EU and US inflation figures came out at or above expectations respectfully.

June was a muted month for sterling, as talk of interest rate hikes came and went and came again with the unexpected extra vote for a hike by the MPC. The gains were short-lived, showing if we see a spike, its normally best to take advantage rather than holding out for more, as that can be costly.

The euro also came under some pressure over interest rates, as the ECB confirmed they were unlikely to be making any moves on that front before the second half of 2019, which led the US dollar to take centre stage, with interest rates going up, more hikes confirmed and despite starting a trade war, Trump’s antics managed to not affect the positivity towards the greenback. Investors continued to back it, leading to some impressive gains against sterling and the single currency.

As July kicks off, will it be much of the same? Those with sterling looking to buy currency will be hoping not, as we saw that overseas villa, or Far East import become increasingly more costly over the month. As always, we now have a fresh round of data to contend with starting off with the key releases for the week below:

Monday – Markit manufacturing PMI for the UK, EU and US and EU unemployment rate

Tuesday – RBA interest rate decision, UK construction PMI

Wednesday – US Independence Day (markets closed), Markit services PMI UK and EU

Thursday – Mark Carney speech, US services PMI and FOMC minutes

Friday – US non-farm payrolls, average earnings and unemployment rate, plus Canadian unemployment rate and PMI

Plenty to go on to move the rates, but will anything be big enough to sway investor sentiment away from the US dollar? For those with an upcoming transfer to make, ensure to keep in touch with the team here for all the updates as the week progresses and some friendly guidance on mitigating the risks.