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The pound bobbed along on Tuesday as markets awaited the Bank's interest rate decision.
Sterling got off to a rather subdued start to this shortened week, the result of geopolitical anxiety and the Bank of England’s (BoE) upcoming interest rate decision.
The pound struggled to build momentum on Tuesday and treaded water against its main competitors. EUR/USD meanwhile gained around a quarter of a per cent, but all in all it was a pretty cagey day for major currencies.
You had to look slightly further afield for more drastic moves. The Australian dollar is now up by almost 2% against the US dollar since this time last week, as the Reserve Bank of Australia left interest rates unchanged while noting that price pressures were easing slower than expected.
The Japanese yen had traded well against the US dollar last week, but its streak of wins stalled yesterday. That came after the US dollar began to shrug off its recent weakness and US treasury secretary Janet Yellen voicing her disagreement with government intervention in currency markets, a tactic many had assumed Japan would turn to.
Back in Europe, Germany’s balance of trade widened to a €22.3bn surplus in March, above February’s €21.4bn but slightly under expectations. Exports to the UK and Russia declined while exports to the USA and China increased from the month before.
UK house prices rose by just 0.1% month-on-month in April. That came after a 0.9% decline in March, with yearly increases now sitting at 1.1%.
Tuesday was dominated by a reserved tone that stemmed from the Middle East. Israeli forces say they now control the Rafah crossing, which Israel had attacked despite indications from Hamas that they had accepted the recent ceasefire deal. The UN continued to warn of “dire” humanitarian conditions.
It wasn’t only currencies that were affected by geopolitics. Commodities like gold and oil were on the charge yesterday, while risk assets and stock indexes struggled.
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GBP: A dovish mood
Sterling continues to struggle under the impression that the BoE will be quicker to loosen interest rates than the Federal Reserve. That may be a hard thing to shake, particularly as the excitement over recent US labour statistics begins to fade.
GBP/USD: the past year
EUR: Stealth attack
The eurozone’s economic data schedule is light this week, which could allow the euro to build on its recent fightback.
GBP/EUR: the past year
USD: Regaining ground
JOLTs job openings caused the US dollar to stumble last week, but renewed stress in the Middle East has helped it regain much of the ground it ceded to rivals on Friday.
EUR/USD: the past year
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