Monthly Currency Report – June 2024

Friday 21st June – The pound (GBP) showed variability last Friday as new economic data offered a mixed view of the UK economy. British retail sales surged by 2.9% in May, recovering from April’s 1.8% decline. However, this optimism was tempered by less favourable PMI surveys, particularly with the services index dropping to a seven-month low.

The euro (EUR) faced early setbacks after PMI surveys indicated weaker-than-expected performance in both manufacturing and services sectors. Despite this initial stumble, the euro managed to recover some of its losses against more volatile currencies later in the day, aided by a shift towards a risk-averse market sentiment.

The US dollar (USD) started the session quietly but gained momentum later, driven by the S&P PMIs. Although these are generally less impactful than ISM releases, the latest surveys provided a boost, with both indices surpassing expectations. The services index, in particular, showed the fastest growth in activity since April 2022.

Thursday 20th June

The pound (GBP) declined following the Bank of England’s (BoE) latest interest rate decision. Although the bank kept rates steady as anticipated, the decision was described as ‘finely balanced’. This dovish tone weighed on the pound, prompting increased speculation of a rate cut in August.

The euro (EUR) weakened due to disappointing German producer price inflation data. Germany’s PPI fell by 2.2% annually in May, fueling expectations that inflationary pressures in Germany and the broader Eurozone may continue to ease in the coming months.

The US dollar (USD) gained ground against some of its weaker counterparts, even though new jobless claims in the US remained high last week. An increase in US Treasury yields likely provided support for the dollar, although the currency’s gains were somewhat limited.

Wednesday 19th June

The pound (GBP) saw an initial rise despite the UK consumer price index showing headline inflation cooling to 2% in May, hitting the Bank of England’s (BoE) target. Persistent inflation in the services sector lent some support to GBP, as markets adjusted their expectations for future BoE rate cuts. However, Sterling’s gains were pared later in the session.

The euro (EUR) remained subdued due to a lack of significant Eurozone economic data. Additionally, a cautiously optimistic market mood contributed to the safe-haven euro’s muted performance.

The US dollar (USD) edged lower as a slight improvement in risk sentiment pressured the safe-haven currency. The absence of significant US economic data also kept the ‘greenback’ in check.

Tuesday 18th June

The pound (GBP) dropped as slowing grocery inflation sparked speculation of a summer interest rate cut from the Bank of England (BoE). Grocery inflation decreased from 2.4% in May to 2.1% in June, marking its 16th consecutive decline. With inflationary pressures appearing to ease, markets began to anticipate the BoE would initiate its rate-cutting cycle in August.

The euro (EUR) remained subdued following a disappointing ZEW economic sentiment index from Germany. Instead of the expected rise from 47.1 to 50, the index only marginally increased to 47.5, falling short of forecasts and putting pressure on the common currency.

The US dollar (USD) stumbled in the afternoon, losing earlier gains due to lacklustre US retail sales data. May’s sales growth was weaker than anticipated, coming in at 0.1% instead of 0.2%. Additionally, April’s figure was revised down from 0% to -0.2%, further weighing on the dollar.

Monday 17th June

The pound (GBP) dipped initially but managed to recover, ending the day with little overall movement. This lack of clear direction was due to the absence of UK economic data, leaving GBP vulnerable to market fluctuations.

The euro (EUR) started the week strong, bolstered by remarks from European Central Bank (ECB) Chief Economist Philip Lane. Lane suggested that the ECB might delay further interest rate cuts, providing support for EUR. However, ongoing political uncertainty in France capped the euro’s gains.

The US dollar (USD) saw early support as a risk-averse sentiment favoured the safe-haven currency. However, increasing speculation about a Federal Reserve rate cut in September applied pressure on USD later in the session.

Friday 14th June – On Friday, the pound (GBP) faced selling pressure as a negative market sentiment weighed on the risk-sensitive UK currency. The absence of British economic data provided no support for GBP.

Political concerns in the EU put pressure on the euro (EUR) amid fears that the upcoming French election could trigger a financial crisis. Investors were anxious that President Emmanuel Macron’s centrist alliance might lose power next month, with some analysts warning that populist fiscal policies could unsettle markets. This apprehension led to declines in French stocks and bonds, along with the euro.

The safe-haven US dollar (USD) gained strength, reaching a five-week high as risk aversion dominated the markets, enhancing USD’s appeal. However, weaker US data limited the currency’s gains later in the session, as the latest consumer confidence index revealed an unexpected drop in morale this month.

Thursday 13th June

The pound (GBP) showed little movement yesterday, subdued by the absence of UK economic data. Markets also had a muted reaction to the Labour Party’s manifesto, as it contained no new policies.

The euro (EUR) came under pressure after Eurozone industrial production data fell short of expectations. Instead of the anticipated 0.2% increase, output contracted by 0.1%, diminishing EUR’s attractiveness.

The US dollar (USD) strengthened on Thursday, supported by a risk-off market sentiment that favoured the safe-haven currency. Investors remained unfazed by an unexpected drop in US producer price inflation and a surprising rise in jobless claims.

Wednesday 12th June

The UK’s latest GDP figures had little effect on the pound (GBP) yesterday, showing the economy stalled as expected in April. This left Sterling vulnerable to market fluctuations, causing it to trade in a wide range against other currencies.

The euro (EUR) gained against weaker peers due to its negative correlation with a declining US dollar (USD). However, the safer euro lost ground against riskier currencies in the afternoon as market sentiment suddenly improved.

The US dollar dropped sharply yesterday afternoon after the latest US consumer price index came in lower than expected, with headline inflation easing from 3.4% to 3.3% in May. The Federal Reserve’s decision later in the evening helped the ‘greenback’ recover some losses, as the Fed indicated it would cut interest rates only once this year. Despite this, the USD ended the day lower.

Tuesday 11th June

The pound (GBP) showed mixed performance yesterday following the UK’s latest labour market report. A surprising rise in April’s unemployment rate put pressure on the pound, but stronger-than-expected wage growth in the same month provided some support.

On Tuesday, political concerns continued to weigh heavily on the euro (EUR) after the weekend’s European elections resulted in significant gains for far-right Eurosceptic parties. Adding to EUR’s losses were worries about the upcoming snap election in France, especially after Moody’s warned it could affect the country’s credit rating.

The US dollar (USD) edged higher, briefly reaching a new one-month high as markets adjusted their expectations ahead of the Federal Reserve’s interest rate decision this evening. Given recent strong US economic data, analysts now expect the Fed to delay plans for any interest rate cuts.

Monday 10th June

The pound (GBP) remained subdued yesterday due to a lack of UK economic data. Investors appeared cautious, refraining from making aggressive bets ahead of today’s jobs data and tomorrow’s GDP report.

The euro (EUR) experienced significant selling pressure, plunging to a 22-month low against the pound. Investor anxiety following the European elections, which saw gains for far-right Eurosceptic parties, and France’s snap election announcement, added to concerns about political instability, weighing heavily on the common currency.

The US dollar (USD) started the week strong as markets continued to adjust their expectations for Federal Reserve interest rate cuts this year, following last week’s robust US jobs data. However, USD hit a ceiling, with investors hesitant to push the ‘greenback’ higher ahead of tomorrow’s consumer price index and the Fed’s monetary policy decision.

Friday 7th June – The pound (GBP) found its footing amidst market volatility, leveraging strong US jobs data to its advantage. The unexpected robustness of the US employment figures stirred anticipation of a more assertive stance from the Federal Reserve, which in turn subdued GBP’s competitors, enabling the pound to assert its strength. Moreover, a marginal decrease in speculations regarding a Bank of England (BoE) interest rate cut provided an additional boost to GBP.

Meanwhile, the euro (EUR) faced downward pressure as it maintained its negative correlation with a rallying US dollar (USD), diminishing EUR’s attractiveness. Furthermore, the receding expectations of Fed rate cuts emphasised the European Central Bank’s (ECB) comparatively cautious approach, particularly after the ECB initiated the unwinding of its monetary policy on Thursday.

The US dollar experienced a surge in the final session of the week following the release of the latest US non-farm payrolls report, which exceeded expectations by a significant margin. With the US economy adding 272,000 jobs in May, well above the anticipated 185,000, markets recalibrated their forecasts, reducing the likelihood of Federal Reserve interest rate cuts for the remainder of the year.

Thursday 6th June

The pound (GBP) struggled to find direction despite the British Chambers of Commerce (BCC) revising its growth forecasts upwards for the UK in 2024 and 2025. The optimism stemming from this upgrade was counterbalanced by a new survey from the Bank of England (BoE), which indicated expectations of decelerating wage growth and output price inflation among businesses in the coming months. These factors, if realised, could contribute to lower headline inflation and potentially prompt BoE interest rate cuts later in the year.

Contrastingly, the euro (EUR) saw gains as the European Central Bank (ECB) adopted a more hawkish stance subsequent to its first interest rate cut in eight years. Despite the market pricing in the rate cut, the ECB’s commitment to maintaining ‘sufficiently restrictive’ rates to rein in inflation bolstered investor confidence, leading to a reduction in expectations for future ECB cuts.

Meanwhile, the US dollar (USD) initially strengthened on Thursday, supported by a modest increase in US Treasury yields. However, the currency relinquished its gains later in the day following a larger-than-anticipated rise in the latest initial jobless claims figure from the US.

Wednesday 5th June

The pound (GBP) made strides against its weaker counterparts despite the absence of significant economic indicators. The sole UK release, the final services PMI, mirrored preliminary estimates, indicating a moderation in activity. Nevertheless, the optimistic outlook for the UK’s crucial services sector likely buoyed GBP.

Conversely, the euro (EUR) encountered selling pressure as it struggled to garner support in anticipation of an impending interest rate cut by the European Central Bank (ECB). Furthermore, a larger-than-expected decline in Eurozone producer price inflation added to the challenges faced by the common currency.

The US dollar (USD) experienced fluctuations yesterday, reacting to a mix of US data releases. Although the latest ADP employment change figure fell short of expectations, signalling a notable deceleration in job growth, the robust performance of the ISM services PMI exceeded forecasts, indicating a robust expansion in US service sector activity and lending support to USD.

Tuesday 4th June

The pound (GBP) exhibited mixed performance amid a dearth of UK economic data, leading to ambiguity in its trajectory. While Sterling advanced against its weaker counterparts, it conceded ground against other currencies.

Similarly, the euro (EUR) faced uncertainty on Tuesday, pressured by a larger-than-expected increase in Germany’s unemployed population. Nevertheless, the euro managed to hold its ground against weaker rivals, benefitting from a risk-averse market sentiment that favoured the safer currency.

Meanwhile, the safe-haven US dollar (USD) staged a recovery on Tuesday, rebounding from a near two-month low observed during overnight trading, supported by a cautious market sentiment. However, the ‘greenback’s’ gains were limited in the afternoon by a greater-than-anticipated decrease in US job openings recorded in April.

Monday 3rd June

The pound (GBP) encountered an initial setback despite the confirmation of an expansion in UK manufacturing activity, failing to propel Sterling higher. However, a shift towards a more positive market sentiment saw the currency, increasingly sensitive to risk, recover against its safer counterparts as the day progressed.

The euro (EUR) faced downward pressure on Tuesday following the confirmation of a contraction in the Eurozone manufacturing PMI, compounded by an uptick in market optimism. Nonetheless, the single currency managed to mitigate more significant losses due to its strong inverse relationship with the declining US dollar (USD).

Meanwhile, the US dollar experienced a decline on Tuesday following the release of the ISM manufacturing PMI for May, which fell short of expectations. Rather than the anticipated increase from 49.1 to 49.6, the index dropped to 48.7, indicating a faster pace of contraction in US factory activity for the previous month.

Currency Ranges for the month:

GBP/USD: Low:   High:

GBP/EUR: Low:    High:

EUR/USD: Low:   High:

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