GBP/USD
Last week, the Pound was greeted by a plump boost against the Dollar as an improvement in risk appetite was sighted in global financial markets. To go into more detail, markets welcomed an announcement from China in which they stated they would commence a phased reopening in Shanghai following its recent ‘lockdown’. With Shanghai containing China’s largest and one of the world’s most important seaport, the country coming out of its lockdown will significantly calm the markets. The reward of this could be felt by the Pound as it climbed slightly on Sunday as markets opened in the evening, as investors opted to enter into riskier currencies. As this situation in China has had a tight grasp on the financial markets since April, the improvement of this may mean that there is a significant flip in market sentiment, benefitting the Pound. With the markets opening for trading today, it is apparent that the Pound is somewhat struggling to sustain its recent gains as the Dollar fights back. Currently, the rate is sitting on the fence, dipping in and out of a decline. Looking at the economic calendar, it is particularly quiet for both sides today, meaning trading will largely be influenced by market sentiment. This gives the potential for the Pound to climb even further following the recent improvement in risk sentiment.
GBP/EUR
Looking back towards the end of last week, the Pound jumped quite substantially against the Euro, uplifting itself from its recent slump. This upwards movement, which was sustained for 3 consecutive days, came about as the Euro struggled with fresh security concerns following Finland and Sweden’s preparations to request a NATO membership. This is expected to significantly frustrate Russia, with Moscow previously warning the 2 countries of joining NATO. Of course, this worried investors and caused them to sell of a large portion of Euro’s, causing the currency to fall. The Pound also managed to extend some of these gains as it benefitted from China’s announcement that Shanghai will begin a phased reopening. With the market opening today, the rate has fallen quite sharply, likely as it has run into some resistance and the Pound running out of steam in its uphill climb. With the economic calendar only containing a few data releases from Europe today it is unlikely that these will have much of a toll on the rate. Trading for the duration of today will likely focus on overall market sentiment and risk appetite.
Morning Update published by Frank Brightman (16/05/2022)