Pound hits multi-month highs on signs of economic recovery

Fears over souring UK-EU relations clashed with positive UK data last week. GBP/EUR fell to a 10-day low of €1.1753 before recovering slightly by the weekend, while GBP/USD ended the week at an eight-month high of US$1.2983.

The euro fluctuated ahead of Sunday’s French Presidential Election, while the US dollar received a boost from strong jobs figures. This week we’ve got ‘Super Thursday’ to look forward to – a day packed full of UK data – but will the news help the pound hold onto its recent highs, or send it plummeting lower?

Pound

Despite being softened by political concerns, the pound was able to largely strengthen last week. Sterling was undermined by concern that deteriorating relations between the UK and the EU would complicate Brexit negotiations and adversely affect the post-divorce relationship. However, economic data was positive, suggesting that the weakness seen in the first three months of the year may be temporary.

Euro

Confidence in the outcome of the French Presidential Election helped push the EUR/USD exchange rate to its best levels - US$1.1000 - since just before the US Presidential Election seven months ago. Data was also supportive, indicating that the economic recovery in the Eurozone continues to gather pace.

US dollar

The US dollar dropped to multi-month lows versus the pound and euro last week. Demand for USD remained tepid despite US economic data being largely solid and the latest communications from the Federal Reserve keeping hopes of an interest rate hike next month high.

Australian dollar & New Zealand dollar

There was plenty of news from central banks and the commodity markets last week to keep the Australian dollar and New Zealand dollar on the move. AUD/GBP fell to an eight-month low of £0.5704 before the weekend, while NZD/GBP bounced off an 11-month low of £0.5215.