Sterling and Euro Rally To New Highs Closing Out June

 

USD

The U.S. continued to lose against all of its European counterparts overnight and the Bloomberg Dollar Index touched a nine-month low.  The dollar’s weakness can mostly be attributed to developments abroad, especially hawkish central bank-speak in Europe.

Unfortunately for the greenback, a slight uptick in fundamental data has not sparked a dollar recovery.  The third reading of first quarter GDP beat estimates, but growth was rather unimpressive.  GDP grew by 1.4% in the first three months of the year, beating estimates and a previous reading of 1.2%.  Personal consumption was also upwardly revised to 1.1% from a prior reading of 0.6%.  While the revisions were better than expected, the report highlights the slow start to the year.  Indeed consumer spending, which accounts for about 70% of the economy, is at its slowest pace since 2013. 

There is no more data set for release today.  Personal income and spending in May tomorrow morning is the last major risk event of the week.        

 

EUR  

After taking a brief breather yesterday morning, the Euro has continued its rally against the U.S. dollar.  The Euro is now at its strongest level since May of 2016.  The most recent pop for the common currency can be attributed to strong German inflation data. 

The overall rally is mostly on new talk of “tapering” the ECB’s monetary stimulus.  The Euro has now broken above technical and physiological levels which has traders reassessing their outlook for the EUR/USD currency pair.  The Euro is still two pennies away from its high of May 2016.  

 

GBP 

The British pound looks to extend its hot streak against its American rival, gaining for a seven consecutive trading sessions.  The run marks the currencies longest stretch of gains since the spring of 2015.  The pound’s overnight strength can be attributed to hawkish comments from Bank of England President Mark Carney.  While speaking at the ECB forum yesterday, Carney said that the Monetary Policy Committee may need to raise interest rates despite a mostly weak economy.  The comments are being viewed as a “U-turn” away from Carney’s recent dovish outlook and are boosting the sterling.

Later today, Prime Minister Theresa May faces a test in the Parliament as MPs will vote on legislative program in London.