Can the pound recover from multi-month lows?

After a poor performance last week, the pound remains in a weaker position against a number of the majors.

GBP/EUR remains in the region of €1.1157, GBP/USD is just about holding $1.3000, GBP/AUD is trading slightly above last week’s multi-month lows (achieving AU$1.6363), GBP/NZD has recovered 0.5% to trade at NZ$1.7491 and GBP/CAD is fluctuating around C$1.6299.

Will the pound bounce back this week? Keep scrolling to find out…

What’s been happening?

It would be fair to say that the pound didn’t have the best time of things last week.

Sterling dropped below $1.30 against the US dollar, hit a 3 ½ month low against the Australian dollar and stumbled all the way to an 8-month low against the euro.

Brexit anxieties, falling Bank of England (BoE) rate hike hopes and disappointing UK data were the main causes of Sterling’s softness, and the British currency approached the weekend on a downtrend.

Meanwhile, the Australian dollar was initially bolstered by the minutes from the last Reserve Bank of Australia (RBA) interest rate decision, as their content was interpreted to mean that the central bank was considering a rate adjustment in the near future.

AUD later fell from its best levels, however, as the RBA’s Deputy Governor talked down speculation surrounding references to a ‘neutral’ interest rate.

The euro, on the other hand, remained elevated in the aftermath of the European Central Bank’s (ECB) latest policy meeting.

ECB President Mario Draghi merely implied that the central bank was likely to begin discussing tightening stimulus in the autumn, but this simple statement proved enough to send the euro shooting higher.

Finally, the US dollar failed to fully take advantage of the pound’s weakness as concerns about the Federal Reserve’s upcoming gathering kept USD exchange rates under pressure.

What's coming up?

There’s no UK data to focus on today, but there’s quite a bit happening elsewhere with the potential to inspire currency movement.

The euro, for example, could fluctuate in reaction to services, manufacturing and composite PMIs for the Eurozone, France and Germany.

If the measures show a reasonable level of growth in the currency bloc, it will encourage speculation that the European Central Bank (ECB) plans to discuss the tapering of quantitative easing in the autumn and lend the euro support.

Disappointing figures, on the other hand, could push the euro away from last week’s best levels.

We also have Canadian wholesale sales data (which might have a modest impact on the Canadian dollar) and preliminary US Markit manufacturing, services and composite PMIs for July.

The Federal Reserve interest rate decision is just days away, and any reports which increase the odds of the central bank adopting a cautious tone on the subject of a third interest rate adjustment in 2017 would be USD negative.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.