GBP/USD
Last night was a rather important one for the Dollar, with the much-awaited Fed Minutes Meeting commencing, enabling investors to see the Fed’s current stance on interest rate hikes. In this it was confirmed that U.S. policymakers might have to reevaluate their current interest rate stance should certain economic factors be met in the coming months. This, in turn, weighed slightly on the Dollar and allowed the Pound to advance against it, reversing the losses we saw earlier in the day. Looking back to today, the rate has not budged much, with it now sitting on par with its highest levels so far this month. The Pound is finding additional support as the market is adopting a ‘risk-on’ mood. Should this continue, the Pound may be able to advance its gains against the Dollar. This may however be somewhat difficult due to the data releases expected from the US today. Around midday, data on GDP Growth is set to be released from the States which, if favourable, will give the Dollar a chance to claw back some of its losses. As for the UK, there is no data on the calendar for the day meaning that the Pound will mainly be buoyed by the current market mood and overall sentiment. For now, the rate is not expected to move too much, with it likely sticking to its current region.
GBP/EUR
This past week has been a rather turbulent one for the Sterling-Euro rate, with it experiencing monthly highs and lows. Yesterday, we saw the rate pull itself up from its recent dip as the Pound capitalized on Euro side weakness. This sizeable upwards shift helped erase a large majority of the losses seen earlier this week. With trading so far today, the rate has been rather unresponsive but has briefly dipped into a small decline. The Pound’s losses are however being limited due to the current risk-on market mood, meaning that the demand for Sterling keeps it supported. The Euro is also finding support from recent comments from ECB President Christine Lagarde in which she effectively promised 0.25% interest rate hikes in July and September. With the ECB having previously taken a dovish approach to rate hikes, this switch in their stance may provide long-term support for the Euro. In the meantime, it is a quiet day on the economic data front for both the UK and Euro Zone. This means that trading today will mainly be influenced by the overall market sentiment.
Morning Update published by Frank Brightman (26/05/2022)