It has been quite an interesting month as far as FX movement is concerned on G10 pairs- from the beginning of April to the end GBPEUR has traded as low as 1.1460 and as high as 1.1784 and GBPUSD has traded as low as 1.3677 and as high as 1.40 (Momentarily).
The theme of the “Vaccination Trade” has now been played out as far as GBP is concerned, and it seems that traders took their profits and added to Euro positions, we have seen this play out as EURUSD has gone from 1.17 to 1.21 through the course of April- which has been the best FX trade to bet on Dollar weakness so far.
This month should be interesting with the UK set for it’s next reopening steps in Mid May- countries throughout Europe preparing for next stages of coming out of Lockdown and vaccines rapidly being administered worldwide- amongst this positivity we are now at a point where economic data will begin telling us more about the state of each country’s economy- much focus will be on employment, monetary policy and any political shifts- so on that note- let’s talk about this week.
The main event in the UK this week is the Scottish Election due to be held on Thursday 6th May. This particular election is not just about who will be running Scotland, but whether another Scottish referendum will be on the cards. The expectation at this point is Nicola Sturgeon will win an outright majority- and another Scottish referendum will be held by 2024. The result of this we can not predict of course, but I do feel that maybe Traders have been caught offside too many times on votes over the last few years (Brexit, Trump etc)- so there is a small chance that we could see some nervous selling of GBP this week as investors factor in some uncertainty surrounding Scotland. These fears will of course dwindle away until a referendum date is set, but it’s always worth noting where a knee jerk reaction can take place.
On the same day, the Bank of England also have their interest rate decision. We are not expecting any changes on rates, however it will be interesting to see the minutes of the meeting and find out how they are currently assessing the economy and what the expectations are at their level on what happens next. With companies opening back up, job advertisements back to pre-pandemic levels and the housing market benefitting from the stamp duty cuts- what will be the next steps for the UK? We will also be looking for any talk on negative rates, though this idea is less talked about now, until it has been ruled out completely, it is still on my bingo card when the BoE speak.
Lastly, as it is the first Friday of the month, we will also have U.S Non Farm Payrolls data to be released, currently we are expecting an improvement on the unemployment rate and better payrolls numbers- so if you are trading USD on Friday this release is worth paying attention to.
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