UK Pound momentum strong, Euro jumps Vs U.S. Dollar overnight 

The British Pound to Dollar exchange rate (GBP/USD) enjoyed another strong day on Monday as Sterling bulls continued to push on. Adding some extra fuel to the fire, Cable was able to post a rally in the Asian session lifting it above the 1.34 handle.

Momentum in the British Pound has been strong, and it has analysts at Scotiabank scratching their heads, as they stated in a recent report,

“From a macro/risks perspective—putting aside gains driven by month-end flows—the GBP’s rise past its European currency peers on Friday and, more so, its break-out of its trading band against the USD, are somewhat perplexing given no-trade-deal risks and a battered economy (more so than most). The week ahead presents little in terms of on-calendar risk with only PMI revisions on Tuesday and Thursday morning (manufacturing and services/composite, respectively).”

Explaining the GBP’s moves is difficult, and perhaps it is simply mirroring some of the somewhat perplexing moves on Wall Street. Now stretched and with a high risk of a reversal, the Pound is no doubt riding high on Dollar weakness and looking like a more volatile long Euro trade.

Euro (EUR) Exchange Rates

A big 0.3% spike in the EUR/USD exchange rate overnight helped lift the common currency ever closer to the 1.20 handle. With the ECB expected to start pushing back around this level, investors don’t appear too concerned as momentum continues to build. EUR/GBP also rose as even the buoyant Pound could not match the buying as Dollar bulls look to be at risk of capitulating. With the end of the summer session in sight, end of month flows could be adding to the strength in the Euro as funds re-position in thin liquidity.

German CPI was flat on Monday, showing inflation does not yet appear to be much of a concern and will enable even more aggressive ECB policy (if that is even possible).

US Dollar (USD) Exchange Rates

Monday was light on the economic data front in the U.S., as a massive rally in Tesla and Apple after their respective stock splits stole the show. Such enthusiasm for a handful of the biggest U.S. companies is not doing much for the Dollar, as a vulnerable USD took a hit.

Other majors 

The Australian Dollar was in focus overnight, as the RBA met to decide on interest rates. No move was made, but interest in the tone of the bank is always important. Australia has not suffered as badly on the coronavirus front and is closely connected to a seemingly vibrant Chinese economy. AUD/USD rose 0.4% on the session.

USD/CNH had a strong start to Tuesday with a 0.4% drop, as the Yuan pressured the Dollar after a stronger than forecast Caixin Manufacturing PMI. The Japanese Yen also capitalized on the vulnerable USD, with a 0.25% gain after its unemployment rate stayed below 3.0%.

Source: ExchangeRates.org.uk

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