28/06/2021

Market report: pound makes gains as dollar falls flat


GBP

The pound started to gain against the euro this morning after slight losses at the end of last week following a more dovish than expected Bank of England (BoE) monetary policy meeting.

The bank said the UK economic recovery was on the right track and this was supported by strong PMI data earlier in the week. However, they did not make any indication on whether they would look to tighten monetary policy, leaving market participants disappointed.

It’s going to be a quieter week for UK data. The main release being the final revision to first quarter GDP on Wednesday and BoE Governor Andrew Bailey speaking on Thursday.

The lack of data releases means the number of daily Covid cases will likely take the market’s attention, with a worrying 14,876 cases confirmed over the last 24 hours.

USD

The dollar ended last week flat against its peers following Friday’s weaker than expected producer price inflation data. The release left investors clueless on whether the US Federal Reserve will act sooner to tackle raising inflation.

The Personal consumption expenditure excluding the volatile food and energy components, increased 0.5%, below economists’ expectations of a 0.6% increase. In the twelve months through May, the core PCE price index shot up 3.4%, the largest gain since April 1992.

Consumer spending, which accounts for more than two-thirds of US economic activity, held steady following an upwardly revised 0.9% jump in April.

There were positives to be found in the The University of Michigan’s Consumer Sentiment Index. In June, sentiment rose to a final reading of 85.5 from May’s final level of 82.9, though it was below the preliminary reading of 86.4. The gains were driven by households with an income of over $100,000 a year.

The survey’s gauge of consumer expectations jumped to 83.5 in June from May’s 78.8, but down modestly from the mid-month reading of 83.8.

Year-ahead inflation expectations fell slightly to 4.2% in June from May’s decade peak of 4.6%, with consumers also believing the price surges are temporary.

The main data releases for the USD this week will be Wednesday’s ADP non-farm employment change and Chicago PMI. Then on Thursday, there’s ISM Manufacturing PMI and Friday will see non-farm employment change. This will be closely watched after the two previous readings fell below expectations.

Key announcements

13:00 – GBP – BoE’s Monetary Policy Committee Member Andy Haldane speaks


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