IFX Market Report: Tuesday 1st June 2021

Thanks to a weaker US Dollar, GBPUSD was able to reach fresh highs not seen since February earlier this year on Monday. One economist noted yesterday that “in the absence of significant fundamental drivers and macroeconomic data releases, month-end flows seem to be causing the greenback to weaken against its major rivals.” These factors, coupled with a weakening US Dollar Index and “thin trading conditions due to the Memorial Day holiday in the US seem to be allowing major pairs to make sharp movements”. The Euro was also able to gain traction against the Dollar on Monday, closing the session above the 1.22 handle.

GBPUSD started the London session quietly, but quickly started to gain momentum when the North American session began in the afternoon. Cable opened the day at 1.4187 but was able to close at 1.4214.

GBPEUR in contrast saw little price action on Monday, opening at 1.1635 and closing at 1.1625.

As already mentioned, EURUSD was able to make significant upside gains on Monday. The pair started the day at 1.2193 and closed at 1.2226.

According to a new study conducted by the Spanish bank BBVA, “investors are turning toward European asset markets at the same time confidence in a Eurozone recovery is intensifying. On the other, the strength of the dollar during the first quarter of this year seems to be disappearing, and the currency is no longer reacting as positively to strong data from the United States.” The bank believes that “once the end of the COVID-19 crisis is closer and recovery is underway, the key will be its consolidation and the way in which the two large central banks—the Federal Reserve (Fed) and the European Central Bank (ECB)—begin to reverse their expansionary policies, as well as the time at which they begin to reduce asset purchases”. In regard to EURUSD, the report claims that in 2022, the bank expects “the euro to continue appreciating very gradually relative to the dollar toward long-term equilibrium levels, which could be around 1.25.”

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