IFX Market Report: Monday 24th June 2019

The pound finished the week higher against the US dollar gaining over 2 cents from the low of the week but remained close to 5-month lows against the euro.

A divergence in monetary policy between the Bank of England and the Federal Reserve helped the pound rise 0.7% against the dollar. On Thursday the BoE reiterated previous comments by saying interest rates would still have to rise in a limited and gradual fashion whilst the Fed have signalled monetary stimulus could be on its way with many experts believing the Fed will reduce interest rates at its July meeting.

Boris Johnson and Jeremy Hunt are vying for votes from Conservative members to become the new Prime Minister, Johnson still appears to be the front runner despite his lead slipping amidst rumours of a domestic row at his house. Most analysts believe either leader will attempt to renegotiate the withdrawal agreement even though the EU have refused to reopen discussions, only Johnson has been clear that the UK must leave the EU by 31st October, with or without a deal.

This has created fear among investors but there are still those who believe this has been exaggerated and the pound still stands to recover against the dollar, from near 1.27 to about 1.32, in the coming months.

GBPUSD opened at 1.2700 and initially fell to a low of 1.2648 before recovering in the afternoon and throughout the evening to reach a 2-week high of 1.2744.

GBPEUR opened at 1.1228 and fell to a low of 1.1183 in the early afternoon, but recovered most of its losses to close at 1.1222.

The US dollar sustained losses on Friday against a basket of currencies as traders continued to bet on the Federal Reserve lowering interest rates next month. The European Central Bank and Bank of Japan are expected to follow suit in order to counteract the economic slowdown and uncertainty from trade tensions. US President Donald Trump will meet Chinese President Xi Jinping this coming weekend, but confidence is low that this will lead to any breakthrough. The dollar was 0.42% lower against a basket of currencies.

The dollar weakness helped the euro to reach a 3-month high, aided by stronger-than-expected data from French and German business activity. Against the euro, the dollar lost 0.67%.

EURUSD opened at1.1311 and made strong gains across the day, closing at 1.1330 and reaching a high of 1.1391 in the evening.

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