Forex snapshot

The pound is unchanged versus the US dollar after the UK Q1 GDP result, while the euro is a touch higher after German inflation ticked up in June.

Sterling note
Source: Bloomberg

Pound steady after GDP data

The pound is trading at $1.7026, and has held onto the gains it made yesterday on the back of Mark Carney’s comments.

As Alastair McCaig noted, volatility is low and the Bank of England stated that any interest rates will be gradual and limited. This moderately hawkish stance has kept the pound around the $1.7 level, and $1.71 seems a long way off.

The final reading of UK Q1 GDP was in line with the initial reading of 0.8%. The US will announce its consumer sentiment reading at 2.55pm (London time), and the consensus is for a reading of 82.2. A strong figure could pull the pound below $1.70 mark.

Looking to next week the bias is to the upside for sterling, and it is receiving support at $1.70. It could creep up the $1.7050 level ahead of next Thursday’s US jobs report.

Spot FX GBP/USD chart

Euro aided by German CPI data

The euro is trading at $1.3616, after weaker-than-expected Spanish inflation figures put pressure on it, but this was offset by an increase in German inflation.

The European Central Bank will hold an interest rate decision on Thursday, and the unexpected increase in the German consumer price index will probably lead to no change in policy from the ECB. The press conference after the meeting will be the highlight of the week. If Mario Draghi suggests that there could be additional monetary easing in the future, depending on the data, we could see the euro head towards $1.3560. It is currently facing resistance at $1.3640.

Spot FX EUR/USD chart

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