Gaining favour

GBP
Gaining favour  

The Pound reached its highest level versus the US Dollar since February today after local elections showed the Conservatives continued to hold the political chips. Sterling rose by 1.0% in Monday's trading to interbank highs of 1.4110 versus the US Dollar and 0.8% against the Euro to reach 1.1600. Since the end of April, the British currency has been strengthening, climbing by almost 2.0% versus the US Dollar; it closed over 1.0% higher last week. Some of Sterling's strength has been attributed to market optimism about the UK economy soon reopening more fully, with more restrictions being eased. Boris Johnson announced further easing from the 17th of May with foreign holidays also on the cards and green-list countries not requiring any quarantine measures. In addition, the Bank of England recently suggested growth prospects had increased with expectations of 7.25% in 2021. In the week ahead, Bank of England Governor Andrew Bailey is due to speak throughout the week, while preliminary GDP growth stats for Q1 are also due to be released. 

EUR
EUR/GBP softens

Despite approaching the 1.16 level in the middle of last week, the British currency failed to break above, ending the week just 0.2% higher. However, today the GBP/EUR pair has reached 1.1600 on political news and optimism on the prospect of the British economy reopening. Thankfully, Europe's coronavirus spread appears to be on the retreat, with some nations such as Germany and Portugal recording consistent decreases. German Chancellor Angela Merkel has said that if the bloc continues on this track, there will soon be the possibility of foreign travel aided by vaccine passports. In the week ahead, Eurozone sentiment surveys will be released. In addition, the European Commission will also release its EU economic forecasts. 

USD
Fed gets room to breathe 

New jobs in April failed to meet the impressive 770,000 created in the US in March, with only 266,000 generated last month data revealed last week. This provides some breathing room for the US Federal Reserve, which has been under pressure to begin reducing monetary support. Meanwhile, the Biden administration is proposing a new $4.1tn infrastructure package. In the week ahead, inflation data will be released, as well as retail spending and consumer confidence stats. 

AUD and NZD
Sterling struggles

During last week's trading, the Pound failed to break the 1.95 level versus the New Zealand Dollar, and closed the week around 0.06% higher. Meanwhile, the Pound to Australian Dollar exchange rate was fairly range-bound, between levels of 1.7806 and 1.8061, but ultimately closed the week around 0.4% lower. Last week showed a healthy increase in Australian manufacturing and service sector activity, while the New Zealand unemployment rate slipped lower on the back of an upswing in job creation. Predictions had suggested unemployment would hold steady at 4.9%, but instead edged to levels of 4.7%. 

In the week ahead, it's mainly Kiwi data that will be emerging, with figures such as retail card spending, manufacturing, and service sector stats released. In Australia, building permits and inflation expectations will print.  

CAD
Disappointing data softens Loonie 

The Pound started strong last week, gaining early on, before slipping to its lowest level against the Canadian Dollar since December 2020 on Friday. However, the Pound was able to catch a breather at the end of the week with a disappointment for Canadian labour market stats, showing a rise in unemployment in April and a bigger-than-forecast decline in jobs. It's a quiet week in terms of economic data, with only a speech from Bank of Canada Governor Tiff Macklem and the bank's senior loan officer survey scheduled to occur, among some other low-tier data releases.