Daily digest market movers: Pound Sterling eyes downside, focus shifts to UK Employment
- The Pound Sterling finds interim support after diving to a more than four-month low near 1.2430. Escalating Middle East tensions and receded bets that the Federal Reserve (Fed) will pivot to rate cuts in the June meeting have dented the appeal of risk-sensitive currencies.
- Hundreds of air strikes from Iran on Israel in retaliation to its attack on the Iranian embassy in Syria near Damascus, in which seven members of its Islamic Revolutionary Guard Corps (IRGC), including two generals, were killed, have spooked demand for risk-perceived currencies.
- Both scenarios—escalation in geopolitical tensions and faded Fed rate cut hopes—are favorable for the US Dollar, which is considered a safe-haven asset. The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, hovers near a fresh five-month high at 106.10.
- In Monday’s session, investors will focus on the United States monthly Retail Sales data for March, which will be published at 12:30 GMT. The Retail Sales data, representing households’ spending is forecasted to have grown by 0.3%, half the pace of February’s 0.6%.
- On the United Kingdom’s front, improved monthly Gross Domestic Product (GDP) numbers have relieved Bank of England (BoE) policymakers. As expected, the monthly GDP for February rose by 0.1%, confirming that the economy is on course to come out of a technical recession registered in the second half of 2023. The economy also expanded by 0.3% in January, revised higher from 0.2%.
- Due to the improving economic outlook, the BoE could maintain a restrictive policy until they gain confidence that inflation will sustainably return to the 2% target.
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