IFX Market Report: Friday 21st June 2019

The pound rally stumbled slightly despite the Bank of England, as expected, being less dovish than other central banks. The policymakers cut second quarter growth forecasts and continued to highlight risks created by Brexit and trade tensions. The pound had reached beyond the 1.27 mark against the dollar but fell back down after the BOE’s announcement, still leaving it 0.4% up on the day. The pound has been making gains in recent days as the dovish Federal Reserve has caused investors to drop some of their dollar positions.

Against the euro, the pound extended losses, down as much as 0.5% before the late afternoon. Economic data continues to move the pound only marginally relative to uncertainty over Brexit and by extension, the Conservative Party leadership election. Boris Johnson and Jeremy Hunt are the two final candidates who will now be competing for votes from the 160,000 Conservative Party members.

GBPUSD opened at 1.2722 and dropped at around midday to a low of 1.2677 before recovering in the afternoon to close at 1.2701

GBPEUR opened at 1.12607 and followed a similar pattern, hitting a low of 1.1213 and recovering to close at 1.1249

The dollar dropped against its rivals on Thursday, its biggest two-day loss in a year, after the Federal Reserve indicated it could cut interest rates as early as July. The dollar fell 0.47% against a basket of rivals and was down 0.78% against the Japanese yen. The sharp fall in the dollar took currency markets by surprise and forced some hedge funds with long-dollar positions to dump the greenback.

The Fed, the ECB and The Reserve Bank of Australia all indicated that more stimulus would be needed to drive economic growth. This fuelled gains in currencies such as New Zealand, Australian and Canadian dollars.

EURUSD opened at 1.1297 and made slight gains in the morning, reach a high of 1.1309 before falling for most of the afternoon to a low of 1.1279 and closing almost unchanged on the day at 1.1291

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