Second quarter report on the Pound

Hi everyone,

The Pound has started to recover following the underwhelming MPC meeting last week which knocked it off track. It meant GBP was one of the worst-performing currencies last week and ends the month and quarter lacking any real impetus. 

Looking at the £-€ performance then in June and the second half of the month was certainly the better. A low of 1.16 and high of 1.17 was an improvement (however small) on 1.1570-1.1660 earlier in the month. Just over 1% volatility in the month is pretty low, which normally means either consolidation on the pair or traders are waiting for something more tangible before placing bets. 

At the beginning of the year, Q2 was meant to be the start of the Pounds fightback after an expected Q1 crash following Brexit. Obviously the reverse happened in Q1, which meant GBP was always going to find it hard to make further gains across the board. The resistance points for £-€ in Q2 have been 1.1450-1.1750, so anything traded over 1.16 is classed as extremely favourable and also one of the best times in 16-months to exchange. 

The graph for £-$ rates in June doesn't look great, especially after starting the month at a 13-month high. It has been a relatively volatile month for this pair with over a 3% swing, mainly due to the Fed's remarks on raising interest rates. The first two-weeks of June showed a steady decline, but things really fell off a cliff halfway through the month which means June has been the worst trading month since September for GBP v USD. 

Traders are not concerned for the £ against the $ and June is expected to be just a bump in the road. This time last year, rates were nearly 10% lower so it has already been a fantastic year for the pair and more is predicted to come. Investor sentiment, lockdown easing and a continued economic recovery will all aid the Pound in Q3, the question is what will be the new headwinds stopping any significant advance..

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