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The US dollar continued to rule the roost on Wednesday.
The US dollar was the main beneficiary of an extremely risk averse tone in currency markets on Wednesday. Investors flocked to the US dollar and away from the pound and euro, which was particularly noteworthy given the proximity to elections in the UK and France.
Markets continued to reel from comments by the Federal Reserve’s Michelle Bowman, who said that she anticipated another interest rate rise before any cuts could be made.
Over the course of yesterday, the euro lost around a quarter of a per cent to the US dollar. Sterling fell against the euro and lost a slightly larger amount —0.4%, to be exact – to the US dollar.
The euro continued to come under pressure, following less than rosy Germany consumer confidence numbers and uncertainty ahead of the first round of French elections.
The Japanese yen yesterday fell to its lowest level against the US dollar since 1986. That could well force the Japanese government to intervene in currency markets, something it has done in the past when the yen dips below the 160 mark against the US dollar.
New home sales in the US fell by 11% in May compared to April. That was the lowest total in 11 months and came well below forecasts as homebuyers continued to struggle with high borrowing costs and the record average price of property.
The UK election coverage centred around the growing betting scandal at the heart of Westminster. That storyline was augmented by the even more bizarre news that an Islington Labour member had been suspended as part of an alleged honeytrap scheme.
Keir Starmer and Rishi Sunak faced off in their last televised debate before next Thursday’s vote. With just one week to go until the election, sterling is entering the most dangerous passage of the political cycle. We’ve already seen markets get a little jumpy when it comes to the election, but past events provide a stark warning of just how quickly currency markets can be flipped on their head.
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GBP: Stretched thin
Sterling’s strong start to June feels like a long time ago. Over the past two weeks, GBP/USD has sank by almost 1.5%, while the pound has fallen off its highs against the euro.
GBP/USD: the past year
EUR: Anxiously waiting
Aside from Friday’s inflation figures, there isn’t too much on the schedule for the eurozone between now and the weekend. That means the euro could well drift until the start of next week, when markets will be anxiously awaiting the results from the first round of the French elections.
GBP/EUR: the past year
USD: GDP to moderate
US GDP growth is expected to have slowed to 1.3% in the first quarter of 2024. That would be a steep drop off from last quarter, so all attention will be on the data this afternoon.
EUR/USD: the past year
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