IFX Market Report: Wednesday 10th June 2020

Sterling had a mixed day on Tuesday, making gains against the US dollar to close at the daily high, whilst enduring a sharp drop versus the euro in the afternoon before ending the day where it began.

The pound has risen by 3.1% versus the dollar this month and yesterday broke the 1.27 level for the first time since March. This was driven solely by risk appetite affecting the dollar, which appears to be trumping Brexit concerns for now.

The latest round of trade talks between Britain and the EU concluded with both sides stating that there was little progress. The UK has until the end of July to request an extension to the transition period, due to finish at the end of the year.

There is no economic data due for release today and focus will be on Friday’s GDP figure.

GBPUSD opened at 1.2636 and closed at a daily high of 1.2734

GBPEUR opened at 1.1222 and fell to a low of 1.1189, before closing back at 1.1228

The US dollar has continued to shift largely in reaction to risk appetite, which has been very much on recently and has caused the greenback to weaken.

With several nations emerging from lockdown status, confidence is returning for investment into riskier, high-yield currencies and a consequent withdrawal from the safe-haven of the dollar. As a result, the currency lost a cent to both sterling and the euro yesterday.

There is also speculation that the Federal Reserve could announce further steps to halt a recent rise in bond yields later today.

Central bankers will publish their first economic projections since the pandemic plunged the country into recession and estimates are expected to signal a collapse in output this year, with near-zero interest rates for the next few years.

The dollar could come under increasing pressure.

The euro made gains yesterday against both sterling and the US dollar. This appears to be reactionary and not eurozone-led, although the single currency is still enjoying a bounce from the recent European Central Bank approval of a larger-than-expected expansion of its stimulus package.

EURUSD opened at 1.1258 and closed at 1.1341

Elsewhere, both the Australian and New Zealand dollar extended their recent rally, as investors continue to revel in a resumption of economic activity in both countries following the lifting of coronavirus restrictions.

Versus the US dollar, the AUD rose 0.46% to just shy of an 11-month high, whilst the NZD also gained 0.5% to almost its highest level since late January.

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