It has been yet another eventful month- with Sterling managing to creep back up against most major currencies- ending the month at 1.42 against the U.S Dollar and above 1.16 against the Euro. The slightly higher monthly close is owed to low liquidity on the markets on Bank Holiday Monday but generally Sterling has been a lot more bullish this month, with the Euro gaining significantly overall.
As we enter June- the most important factor which will decide the direction for Sterling exchange rates will be if the UK proceeds with the next step of coming out of lockdown on June 21st. Currently, there are concerns with rising rates of different variants around the country, but this seems to be getting tackled with a rise in vaccinations and rapid mass testing in the affected areas- this should hopefully be enough to allow the Government to move to next steps- I do feel the messaging may change and it seems unlikely the UK will go back to zero social distancing, no masks etc just yet- but a next step will be a great positive. Unfortunately, with the markets being so sensitive at the moment- if this isn’t the case- then we may see the Pound fall a little- so this is something to keep an eye on.
Providing we see everything go to plan globally- we should see more travel and tourism through the Summer- which means more spending on clothes, flights, and holidays overall- this will help with adding jobs in particular areas and help the hospitality industry globally- once the world is out of restrictions- the next concern for the market is jobs- and currently the picture does not look fantastic, fortunately, there are furlough schemes helping many people, but once the support has been taken away, is when we will see the real picture.
Employment will then give us a better picture on the economy as a whole- if prices are going up, we need wages to go up with them, and eventually interest rates have to go up (2022 at the earliest) while QE has to go down- it’s going to be very much based on monetary policy moving forward, which will be a little more stable than what we have had to deal with over the last year that’s for sure!
As always, if you have any particular questions on a currency pair- please don’t hesitate to contact me.