• Brexit comments boost pound
  • French and German CPI unchanged
  • Yellen more dovish than expected

Sterling gains on positive Brexit comment

The pound performed well yesterday, gaining significant ground across the board after new unemployment claims fell rather than rose and average earnings rose 0.1% more than expected, up 0.3% for the month of May. Combined with uncertainty ahead of comments from US Fed chair Janet Yellen, this allowed the pound to gain 0.3% against the dollar and 0.8% against the euro.

A lack of economic data releases wasn’t enough to cap the pound this morning, as positive Brexit comments gave the currency a boost. A junior Brexit minister is quoted as saying “the UK will not pay a penny more than needed for EU exit bill”. This boosted investor sentiment that the UK would not be pushed around by the EU in upcoming negotiations. Off the back of this the currency has gained an average of 0.35% in this morning’s trading.

Euro struggles on lack of data

The single currency struggled yesterday, losing 0.48% against the dollar and 0.8% against the pound. A lack of key economic data releases left the euro vulnerable to wider market pressures, with positive data from the UK as well as more limited pressure from the dollar, as investors held their breath ahead of US Fed chair Janet Yellen’s comments.

This morning we have had the release of French and German CPI inflation. As expected, both inflation numbers remained unchanged from prior at 0.0% and 0.2% respectively. While this has had a limited impact on the currency this morning it has solidified the uncertainty surrounding the supposed economic recovery within the Eurozone.

Dollar knocked by dovish Yellen comments

The greenback posted a mixed and uncertain performance yesterday as all eyes fell to the US Fed chair Janet Yellen. Against a stronger pound the currency lost 0.3% but gained nearly half a percent against the euro. The primary focus for yesterday was the comments from Fed chair Janet Yellen later in the day.

Generally the tone of the speech was largely positive, with Yellen stating that the Fed felt it would be prudent to continue to raise rates at a controlled pace. However, some took note of her comments with regards to inflation. Yellen commented that ongoing low inflation may limit the Fed’s ability to hike rates in the short term.

Today we have the release of initial jobless claims, which are expected to fall by 3,000 and could provide the dollar with limited upside support. However, the Yellen’s comments are likely to remain in investors’ minds and could limit upside moves.

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