The pound had a very flat day yesterday, only enjoying a short-lived bounce against the US dollar in early afternoon trading. Having opened at a stronger position versus the euro, the pairing maintained the status quo throughout the day.
Analysts are edging toward downside risks for the currency this month, with the crisis already priced in and May, traditionally, offering little in the way of positive catalysts. A survey from the CBI showed small UK manufacturers expect the biggest decline in output in more than 30 years over the next three months, mirroring other negative forecasts for the sector.
There was some good news, as it was announced the UK will shortly open trade negotiations with the US by video-conference. Meanwhile, investors will be looking to the BoE meeting tomorrow, which could provide fresh impetus for sterling movement.
There is no significant economic data for the UK today.
GBPUSD opened at 1.2433 and peaked at 1.2476, closing at 1.2433 once again
GBPEUR opened at 1.1461 and remained flat, finishing at 1.1469
The US was bolstered by the prospect of reopening in some American states, as well as services data that was stronger than the market anticipated. However, this did little to move the dollar as it directly weighs against consequential risk-on sentiment.
In afternoon trading, the dollar index was up 0.2% at 99.714.
The euro is looking vulnerable to losses, after a German constitutional court ruled that the Bundesbank must stop buying government bonds if the European Central Bank cannot prove those purchases are needed. The decision did not apply to the ECB’s 750 billion-euro scheme to prop up the economy during the pandemic, but the ruling unsettled financial markets that had been calmed by aggressive asset purchases aimed at preventing an economic meltdown due to the ongoing crisis.
However, the ruling is unlikely to completely derail Europe’s stimulus programme, since the ECB is broadly expected to be able to justify its bond purchases and retain the Bundesbank as a participant.
EURUSD opened at 1.0848 and peaked at 1.0876, closing at 1.0839
In other news, the New Zealand dollar has made gains this morning following the overnight release of better-than-forecast employment data.